Are appraisers helping investors?

April 19th, 2012 by Harvey Blankfeld

I know that I tend to beat up appraisers so let me preface this post by saying that I know some very fine and professional appraisers that don’t deserve my comments.

That being said, I need to relay a story that happens all too often.  An FHA buyer submitted and had accepted an offer on a beautiful one story home in Summerlin.   His offer was equal to the last sold model match, which sold only 2 months earlier.  When he received his appraisal, it came in $21,000 light of the contracted price of $180,000.  The last sold model match sold for $180,000.  The appraiser felt it necessary to reduce the most recent sold comparable by 5%/month to accommodate what he said was a declining market.  The prices in this sub-division haven’t fallen at all in more than 15 months.  So the buyer, being stuck with this appraisal has no choice but to withdraw his offer and try to find another home that will appraise.  In the meantime, an investor that wrote a cash offer that doesn’t require an appraisal, will end up getting the home for $172,000.  That will help justify the appraiser’s work and force our market to slide again.

When an appraiser doesn’t do his job correctly, it impacts so much more than one deal.  This real estate transaction, could have served to help stabilize our values and put an owner occupant in a home, instead it de-stabilizes our market and created another rental.

There are some that believe the banks loaning money have implemented procedures to insure that appraisals come in low.  The ironic part of that is that the banks own most of the homes on the market and they are serving to keep the prices down on the very product they are selling!  I myself, don’t believe they are doing that, but I do believe they should be helping all of us to insure that appraisers can be held accountable for bringing in low appraisals.

I know that there may be people that believe that I’m just another Realtor complaining about appraisals because it’s hurting my commissions.  I can assure you that my rant is about what’s fair to regular home buyers versus investors.  I actually help many investors buy homes and I believe in real estate investment as part of anyone’s financial portfolio, but I also still believe in the American Dream.  I know it’s been a nightmare the last several years, but if we are going to go back to good times, we need to have an environment that promotes home ownership.  I’m not in favor of “no money down” or going back to the days of loaning money to anyone that can fog a mirror.  I’m in favor of giving families an opportunity to own their own home, instead of renting it.

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Las Vegas Real Estate Market Update April 2012

April 13th, 2012 by Harvey Blankfeld

Have you ever heard the saying “If you don’t like the weather, wait a minute.”

Well, that applies to our real estate market too. The most recent development surrounds our current inventory. As of this moment we have 5,474 single family homes available in our entire multiple list. We have 13,113 single family homes in escrow. We have closed 3,195 homes in the last 30 days.

That means we have about 45 days worth of inventory available. One of the basic premises of economics is that when an inventory of available product is low and the demand is high, prices go up. That’s not happening though. There are three reasons that pricing has not reacted to the inventory. First, the low inventory is partially a result of the lack of bank foreclosures over the last 5 months. The banks will eventually start bringing homes back to market. I do want to caution buyers however, there aren’t as many out there as you think. It’s likely that once the banks fire up their machines again the output will be the same or even less than it was last year. That’s because the banks are liking short sales. The second reason for prices not moving is the appraisals. You have heard me whine about this before, but it’s still happening. Appraisers just find it easy to bring homes in low and there is no way we can get them to allow prices to start moving in the right direction. The third reason, is that buyers are still cautious. There is a real sense that we may see another downturn in pricing as a result of either interest rates going up, or demand drying up.

All of these reasons have some validity. There will come a day, in the not too distant future when prices will start to rise. That’s when the buyers will all want to buy.  Some of the wealthiest people in our country made their money in Real Estate markets just like this!  Pay attention buyers.  You will be wondering in 5 years why you didn’t buy now.

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February Market Conditions

February 16th, 2011 by Harvey Blankfeld

Available inventory remains stable. Prices remain stable for listings under $200,000. Listings above that are still experiencing some small drops. Short sales dominate our market but traditional sellers are making up a bigger portion of our current inventory than we’ve seen in recent years. We’ve seen some small improvement in appraisals where the appraisers seem to be giving value to the condition of the property.

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Short Sale Appraisals

October 15th, 2010 by Harvey Blankfeld

We are seeing a recurring issue in trying to close deals when there is a third party approval required (Short Sale).  The lender (servicer, investor, MI company, etc) is countering the offer with an inflated value on the property.  When we challenge the counter by pointing out that the comparable properties don’t support their inflated counter offer the lender invariably replies that the value was based on their appraisal.  I find that reply to be somewhat insulting, but I can’t challenge it.  I also believe that more times than not it’s actually not an appraisal but a BPO (Broker’s Price Opinion).  That means the bank asked another Real Estate agent about the value and paid a minimal amount to get it.  Then again, the bank might just be pulling a number out of thin air and claiming it’s an appraisal as we would never actually see the appraisal.

The way we have succesfully moved forward under these circumstances is to encourage the buyer to accept the counter and invest in an appraisal from their own lender.  We sometimes extend the buyers additional diligence so they don’t have to spend money on an inspection if they don’t go forward on the deal.  What this does is gives us an actual appraised value on the home and the lender that has to approve the short sale is faced with the reality of that appraisal.  The short sale lender has reduced to the appraised value each time we have done this and the buyer has been able to close the deal at a true value.

There is some risk on behalf of the buyer, because if the appraisal comes in at the inflated number, then the buyer has to choose whether to move forward or not.  I would point out that if an appraiser brought in the value, it is most likely accurate as most appraisers these days find it very easy to bring values in low.

Just another twist in our ever evolving real estate market!

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Appraisals in our downward market

April 23rd, 2009 by Harvey Blankfeld

I really have a genuine empathy for appraisers.  I know that there job is difficult and tedious.  I also know that they are currently faced with great challenges.

The currently downward market presents a challenge that seems to be insurmountable.  When given the task of appraising a home that is currently occupied and in good or great condition, appraisers have a difficult time giving value to that home’s improvements and it’s condition.  They must pull comparables and the vast majority of comparables are REOs.  Those homes are in dis-repair and vacant and have lost significant value.  Appraisers must also pull available properties in the market.  Those homes also are mostly REOs and are also vacant and often in disrepair.

If a seller needs to sell in this market, they are faced with the fact that they must not only compete with foreclosures, but they must endure the indignity of dealing with an appraisal that won’t give them enough credit for maintaining or improving their home.  Appraisers are forced to perpetuate this downward market by not allowing sellers to have reasonable value given to their upgrades.  I’m not talking about retail value for those improvements, I’m talking about a home with a pool, patio cover, new carpet, freshly painted, new air conditioner, new hot water heater, new stone counters, well maintained, and pridefully lived in only getting appraised at $12,000 more than a model match that was gutted and had none of those improvements.  It had no appliances, no pool, no landscaping, etc.

The appraiser explained that his hands were tied.  He had to use comparables that were deficient and couldn’t give sufficient value to the improvements.  The seller, that understands the market is down strongly, has no choice but to accept this appraisal, because the seller needs to move.  The appraisal really can’t be challenged, because of the strict new guidelines limiting access to them.

I believe that appraisers need to be kept independant of Realtor and lender influence, but I also believe that they need to be given the ability to think logically and utilize the skills they have learned over the years.  If appraisers can’t give appropriate value to condition or improvements, our market will be perpetually forced downward.  That must end.

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