Back in the ancient days of 2011 the soothsayers stated the housing market would NEVER improve. Now they are screaming our values have increased 50%. The truth is out there, but not in the media.
When financing a home, the successful closing of a purchase or refinance will depend on the appraisal. Appraisals are based on historical statistics. They are subjective, with an opinion of value from an independent appraiser.
Rising prices present challenges. Per guidelines the appraisal should include three comparable sold properties within 120 days in the same subdivision, the most recent sales taking priority. The appraiser can’t pick and choose. For instance the short sale that sold for $50,000 less yesterday cannot be ignored. The underwriters now have their own automated value systems (AVMs) and are required to check for overlooked comps.
With low inventory, it encourages multiple offers from anxious buyers. Last month, when one agent was asked for comps to combat a low appraisal, he reacted by stating it was the only home for sale in the neighborhood; therefore it warranted a higher sales price. HVCC eliminated the “you don’t understand, there are no other homes for sale key” from the appraisal process.
One of our clients transferred their loan from a major bank because the appraisal came in $60,000 less than the estimated value. We told him we could not guarantee that a new assessment would be any different. (Isn’t it sad that appraisers can’t notify us if it is coming in low with the exception of VA?) The new value and I can’t a make this up, appraised $70,000 OVER the bank’s appraisal.
To dispute an appraisal, solid comps are a must. One listing agent challenged a low appraisal by stating her home was much prettier than any other home. “The most beautiful house in the neighborhood key” is no longer a part of the appraisal.
Flipped properties can be problematic because a dollar for dollar increase in upgrades may not justify the asking price. To make sure an investor is not slapping lipstick on a pig, strong home inspections are a must.
Real Estate Agents who meet appraisers at their listing and provide similar comparables, (close in square footage, same type of house) may find their appraisals coming in at value.
In this transitional market, we are all asking ourselves, do we feel lucky? So do ya?