Despite the government’s horrible new law, HVCC, this home sold well over appraised value!
WHY, WHAT’S THE STORY?
I was contacted by John and Sue to sell their home on east Topeka. I meet with them and discussed the comparable sales. However, in their case I had just worked with a buyer looking for a similar home. He would have bought their home if it were available 2 months prior. I knew the comparable sales we were looking at did not represent what a buyer was willing to pay, Or the market value of their home.
WHY WERE THE COMPS OFF SO MUCH?
In some neighborhoods, as the market adjusted the only sales have been Short Sales and REO/Foreclosure/Bank Owned homes. With a good Realtor, most Bank Owned homes sell at market value, however, many banks hire poor service agents that sell them below market value. The real truth about Short Sales is they must be offered below market value to attract a buyer. Why would a buyer wait 4 to 6 months to maybe buy a home, unless the buyer was getting a GREAT price for that risk?
ONE CLOSE RETAIL SALE GUIDED US TO MARKET VALUE
In this area, all the relative close comps were REO and Short Sales, except one. Funny thing is I showed this comp to my buyer a few months ago. It finally closed at $310,000. But it was a 2 car garage, an older home, it had different sized tile both 8 inch and 14 inch and it was slightly smaller.
I told my clients that based on that sale, my experience with my buyer and the fact there are just no other alternatives I believe we should price this home at $325,000 and expect $310,000 to $320,000.
WE LISTED THE HOME FOR $325,000 AND DREW MASS BUYERS
I was shocked at the activity, it was getting shown more than once a day. Then, the calls started coming from agents. “I totally see the value, but fear getting an appraisal” was the story. Within a little over a week, we had an offer for $320,000, no closing costs, FHA loan and 3 others ready to write. Many of the others wanted closing costs etc.. so we accepted our first offer. The first offer in many cases is the best.
APPRAISAL TIME
Needless to say the appraisal came in at $300,000. What upset me most about this appraisal was the appraiser used my comp. The home mentioned above that sold for $310,000, and he adjusted it to $329,000. Which means based on that sale and the differences in the homes the subject property, my clients home, is worth $329,000. Here is where the problem lied, it was the other 2 homes. One adjusted to $300,000 and the other adjusted to $280,000.
FIGHT THE APPRAISAL
This is why the new law HVCC is in effect, so we can’t pressure the appraiser. But in this case, the buyer was able to question the appraisal and cause a review. I sent several comps and asked, “if you would give us some value for the fact our lot is 15-20% larger than the comps and just drop the low comp, replacing it with a new one.” Based on his appraisal, the value dropped when he decided to use the other 2 lower comps. This is where an appraisal is SUBJECTIVE. If he would have used one of my comps he could have easily got the value or at least get us up to $310,000. You see the buyer was willing to increase his cash out of pocket so an appraisal at $310,000 would allow our contract to proceed.
PROBLEM WITH HVCC AND NO ACCOUNTABILITY TO APPRAISERS
Here lies the problem. We followed the system. Our comps made sense and were logical. There was no reason for the appraiser not to make some kind of adjustment. But I don’t really know if he even looked at it. 2 weeks passed and we got a “the appraiser is not adjusting the value.” So, did he look at it? Why would he not adjust? This is business, just give me your reasoning???
Or is the answer, I am only being paid 1/2 my normal pay as an appraiser and therefore will not take the time to even look at it. Or is it, I have no accountability to anyone now. Why should I spend my time when it does not matter. Or is it, I am afraid of the new law and won’t make an adjustment. Or even could be possible that he felt that was the value. But with no communication, how am I suppose to know!
WHAT DETERMINES MARKET VALUE?
Really what does? How about the fact that a buyer was willing to come out of pocket an extra $10k in order to buy the home. How about the fact that every time I put the home back on the market we got incredible activity and offers with a week or so? How about all but the final offer coming in at $320,000? Yes, is the answer. These all are signs of value. An appraiser job is to justify that value. Remember an appraisal is just one person’s opinion of value based on fact. The subject part is what fact does the appraiser use???
APPRAISERS SHOULD, in my opinion
I believe an appraiser should review an offer. Check to make sure it appears legitimate, meaning no scams. Then look at the reasonable sales to JUSTIFY the value. You see when there are 20 possible comps to use in today’s market, they will be all over the place due to Foreclosures, Short Sales and just this market. An appraiser should look for comparable sales that are relevant and that justify the value. That takes time in today’s world of real estate. I ask, will an appraiser work twice as hard for half the pay? Or will they be trying to work twice as hard to get back to regular pay, meaning doing twice as much work? I believe many appraisers will work hard their work will justify market value. But what percent. With this new law they are working all over the valley instead of focusing in one area.
SO WHAT HAPPENED, YOU SAID THEY GOT 12% OVER APPRAISAL?
Sorry, long story. Yes, 3 times was a charm. Our 3rd buyer was an investor. He was putting $100,000 down and would be able to pay over appraiser value. So, the seller ended up taking a lower offer at $312,500 because of the appraisal issues. The final appraisal came in at $280,000. I met the appraiser at the home, gave him comps, sales stats showing market increase of 10% since April and offered any help I could. He was doing 5 appraisals that day and it took a little over 2 weeks for him to get the appraisal back to the bank. MUST I SAY ANY MORE?????
WHAT INVESTOR WOULD PAY 12% OVER APPRAISED VALUE?
This is easy, an investor that knows he is getting a DEAL!
BTW, we have had about 12 homes that did not appraise in the past couple of months. in most cases, bank owned for sure, the price was reduced. This is how HVCC is hurting your home’s value.
Simply put, if there is no real reason for the market value, then appraisers should not have pressure to adjust a home’s value higher. But, they should have accountability for the quality of their work. This law, HVCC, takes away all accountability! If there is good reason for value, an appraiser work should be able to be questioned. Why should one person’s opinion of value, based on subjective facts be the rule of law. BTW, you can get appraisal, but the lender will use the lower of the two appraisals! OHHHHH!
Just my opinion…Jeff Cameron
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