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.
Short Sale Appraisals
October 15th, 2010 by Harvey BlankfeldWe 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!
Appraisals in our downward market
April 23rd, 2009 by Harvey BlankfeldI 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.
