Showing posts with label low appraisals. Show all posts
Showing posts with label low appraisals. Show all posts

Monday, May 06, 2013

Closed last week: 16909 Flanders, Granada Hills

My listing at 16909 Flanders in Granada Hills closed last Friday for $539,000.  We had it in escrow for $550,000 but the appraisal came in at lower, so everybody took a haircut.  I have a history with this house.  I sold it to the previous seller, sold it for them to the current seller, and now have sold it to future sellers.  In the meantime, I went to a lot of fun parties there and was even naked in the pool (see below -- it was in the line of duty).  If you're a buyer, it's worth it to check out this neighborhood.  The housing stock is really nice, prices are still reasonable and Granada Hills High just won the state academic decathalon.

Monday, November 12, 2012

Ask the home appraiser

Have you been curious about some of the finer points of home appraisals? I have -- and although I deal with them all the time, things change.  My office recently brought in an appraiser to speak, and here are some of the more pertinent questions and answers.  Remember, these answers were given for a Realtor's perspective.  The comments in italics are mine.

  • Is there a difference between independent appraisers and bank approved appraisers? How do you get to be an approved appraiser? Answer: Banks get their appraisers from appraisal management companies.  For an appraiser to get approved he has to submit a resume package like anyone else looking for a job.
  • What do you do if you get what you consider an undeserved bad appraisal? Should you challenge it with comparables or demand another appraisal? Answer: It is very much better to challenge it with your own comparables.  The management company will ask the appraiser to respond and defind his values.  (Personally, I always give an appraiser comparables before the actual appraisal.)
  • On second appraisals (often done if there is a value question), does the 2nd appraiser know what the 1st appraiser came in at? No.
  • How much does an appraiser credit a house for on the following? Answer: extra bedroom $5-10,000; extra bathroom $5-10,000, pool $10-15,000 (except in Beverly Hills, where it's $50,000 (the extra bedroom credit is much lower than I had previously thought).
  • How do you define baths? What does it have to have? Answer: 1/4 bath means sink only, 1/2 bath means sink and toilet, 3/4 bath and full bath are the same for valuation purposes and mean shower and/or tub, sink and toilet.
  • Under what circumstances does a convertible den count as a bedroom, assuming there is a closet? Answer: If it has a closet it counts as a bedroom if it is larger than 80 square feet.
  • When looking for comps, would an appraiser extend the radius of surrounding comparables or would the appraiser go back further than 90 days. Answer: The appraiser would extend the mile radius.  He would NOT go back more than 90 days.
  • What is the value of "multiple offers" on a property to the appraiser? For the appraised value, only the closed sales figures can be used.  Actives and Pendings are important for the appraiser to note on the appraisal as a matter of interest for the big picture and to see how the neighborhood is trending.
  • Can you use new construction as a comp for non-new construction? Answer: no.
  • Can you use non-new construction as a comp for new construction? Answer: yes, with an adjustment for the age value.
  • What about a total remodel? Answer: No, you cannot use new construction as a comparable.
  • Can you count unpermitted structures, unpermitted work, or unpermitted useage or square footage in the value? Answer: No.  All the appraiser can note is that the work was done in a workman-like manner and there is no health hazard.
  • What can a seller do to make the property the most appealing? Answer: Appraisers are now required to take a picture of every room, so sellers should prepare the house as if they were having it must look as good as possible for the appraiser.

Sunday, June 10, 2012

Shortage of homes creates fierce competition, says L.A. Times

Just as I've been saying and buyers have been experiencing, today's L.A. Times has a front page story about our current market, its low inventory and how wildly competitive it is.  Click here for link.  The entire article is fascinating; here are some of the more succinct quotes:

"Housing inventory has sunk to levels not seen since the bubble years. The number of American homes with a "for sale" sign hit 2.5 million in April, the lowest number for an April since 2006."

"The much-predicted foreclosure wave that was expected to dump more homes onto the market has not materialized. Fewer borrowers are entering default, and banks are better managing the properties they do have on their books."

"Also important is having enough cash to make up the difference between the negotiated price and whatever the appraised value of the home turns out to be, he said. (Lenders won't provide a mortgage for more than a home's appraised value.) Many deals these days are falling apart because appraisals are coming in low, given how many recent comparable sales have been foreclosures or other distressed properties."

Thursday, December 01, 2011

4604 Norwich in Sherman Oaks closed yesterday at $592,000

4604 Norwich in Sherman Oaks closed yesterday for $592,000.  It was listed at $550,000.  We had six offers in the first week from qualified buyers and the lowest was $565,000.  Although that sounds like it was probably an easy-peasy deal for me, it had serious challenges all the way through.  I blogged about the weird appraisal earlier and may expand on that some day.  Other issues: there was no money in the HOA reserves -- this was my very first time dealing with that, and we had to come up with ways to get it funded.  Oh, the list goes on.  As I said, I may blog more about this in the future.

Thursday, June 23, 2011

Appraisal problems

Appraisal problems are a fact of life in the real estate market these days, and I just had one. My listing at 1106 N. Cordova in Burbank appraised through Wells Fargo* for $14,000 less than what it is in escrow for.  The buyer had already waived the appraisal contingency, but the sellers and I wanted her to feel good about her purchase, so we cooperated with a second appraisal with her new lender, Great Western.  This time, I met the appraiser and brought area comparables along with the final cost sheet prepared by the contractor who had done the updates.  I also sent the appraiser copies of the other offers we'd received so he could see the range the "market" was willing to pay for the house.  Sure enough, this time the appraisal came out right at the sales price.  I'm sorry the buyer had to pay for two appraisals, but I'm sure she now feels even better about the purchase of this cute home.

*Note that I'm bashing the big banks once again.  Yes, this is a common theme of this blog.

Thursday, August 13, 2009

Tale of two appraisals.

It was the best of appraisals, it was the worst of appraisals. And both were on the same house. Names and addresses are left out here to protect bla bla bla.

Backstory: the house was bought at a foreclosure auction in May, fixed up, and sold to my clients in July. Our purchase price is $525k.

The first appraisal came in at $425k. The appraiser was from out of the area. We knew we were in trouble when the cover page picture was of some other house. And two comps used were on major streets, not residential streets. What happens when an appraisal comes in so low? The lender will only loan 80% of the appraised value.

The second appraisal was done two weeks later after the clients switched lenders. The appraiser used realistic comps. And the value came in at $525k. Not only will the bank loan more money on this property, but my buyer clients are relieved that the house is currently worth what they agreed to pay for it.

How can two appraisals be so different? The answer may have to do with new appraisal regulations. Banks and lenders now have to order their appraisals from pools of appraisers, rather than just calling individuals they've worked with before. And these pools are undercutting each other on price. So what you get are inexperienced appraisers doing as much as they can, as fast as they can, as cheaply as they can. And often not doing a very good job in picking comparable properties. If you're in this situation, don't be afraid to ask for an appraisal review if you think that something about the appraisal just doesn't quite smell right.