THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Sunday, November 27, 1994 TAG: 9411230285
SECTION: CAROLINA COAST PAGE: 21 EDITION: FINAL
TYPE: Real Estate
SOURCE: Chris Kidder
LENGTH: Medium: 100 lines
Three weeks ago we took a first look at the fourth edition of North Carolina Real Estate for Brokers and Salesmen.
Nearly eight years in the making, this textbook used by most of the state's real estate educators reflects industry changes that affects buyers and sellers of real estate along with their agents.
There was a typographical error in that column. Deeds must be ``signed, sealed and delivered,'' I wrote. ``This time, one final requirement has been added: the deed must be delivered.''
Delivered? Again? No. The line should have read, ``the deed must be accepted.''
Delivery has always assumed acceptance but the courts are now acknowledging that someone (the grantee) can refuse to accept delivery of a deed. If delivery is refused, it makes no difference whether the deed was properly signed and sealed: the property still belongs to the grantor.
Authors Patrick Hetrick and Larry Outlaw expanded the ``Property Taxation and Assessment'' chapter of their new textbook to explain the differences between appraised value, market value and assessed value.
They take pages to explain true market value, something akin to true grit: easy to want but hard to find. A brief but inadequate definition is that true market value is the highest price acceptable to a seller that a buyer will pay for a property.
Although there are exceptions to this definition, it seems to suit buyers.
Sellers, in general, don't agree. They define true market value as the price they want for their property (although not necessarily the lowest price they will accept).
Real estate agents are stuck in the middle, trying to put a price tag on something dictated by supply and demand, social trends, economic circumstances, government controls and regulations and environmental conditions.
The new textbook warns real estate agents against using the term ``appraisal'' unless they are referring to a formal, written and documented estimate of value prepared by a professional appraiser.
Real estate agents are advised to use a ``comparative market analysis,'' called a CMA, which is the new term for a market data approach explained in the old textbook. It is the informal equivalent of the sales comparison approach, one of three accepted methods of valuation used by appraisers.
The federal Financial Institutions Reform, Recovery Enforcement Act (FIRREA) of 1989 regulates appraisers. It requires that any appraiser performing property appraisals in federally-related transactions be licensed or certified.
In response to FIRREA, the N. C. Appraisal Board was separated from the N.C. Real Estate Commission on July 1, 1994. The board now operates a voluntary licensing and certification program.
The only mandatory requirement for appraisers in North Carolina is that they be licensed real estate brokers. But because most mortgages involve the federal goverment - either as a guarantor for a loan (FHA, VA or FmHA) or in a government-backed secondary mortgage market (Fannie Mae, Freddie Mac) - most appraisers must be licensed or certified to do business.
Licensed or not, an appraisal is still nothing more than an opinion and an estimate of value. Although an appraiser and a real estate agent are both trying to determine the true market value of a property using roughly the same method, the results may not be the same.
Using the sales comparison approach for a residential property, a professional appraiser relies on ``comparables'' - similar properties sold recently in the open market - for objective, quantitative data.
Good real estate agents, on the other hand, approach value from a different perspective. They understand the formal appraisal process but may view value more intuitively based on their knowledge of subjective factors that influence buyers. Others involved in the real estate transaction have their own definition of value.
Lenders talk about ``loan value,'' usually 80 to 90 percent of the appraised value, when referring to the amount of money their institution will lend on a property. Loan value sometimes has less to do with the purchase price than with the property's worth in the lender's financial portfolio.
The county tax assessor will offer another measure of a property's value. Keep in mind that tax assessments are periodic. In Dare County, for example, assessments are updated every five years. And, the assessment process is cursory, at best, involving the briefest of exterior inspections except when assigned values are disputed.
According to Hetrick and Outlaw, ``Assessed value is, by law, supposed to be market value,'' but ``in reality, the assessed value of a parcel of real property is frequently, if not typically, not representative of the true market value.''
In North Carolina, tax assessments of real property are done to satisfy the state's ad valorem property tax (a tax levied according to value). An ingenious piece of legislation called the ``Machinery Act'' spells out the where, what, how and when.
You can thank the Machinery Act for the confusing system that places a tax lien on property in January of each year, even though the tax rate isn't set by the counties until the following June or July.
The taxes aren't due until September and can be paid as late as the first week in January of the next year without penalty. MEMO: Chris Kidder covers Outer Banks real estate for The Carolina Coast. Send
comments and questions to her at P.O. Box 10, Nags Head, N.C. 27959.
by CNB