Tag Archives: real estate appraisals

Real Estate Appraisal Values Lag Behind Market

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In a shifting market it’s not uncommon for real estate appraisal values to lag behind the market of the moment.  We have such a market in SW Florida.

Real Estate Appraisal Values Lag Behind Market
Real Estate Appraisal Values Lag Behind Market

Have you ever noticed when gas prices at the pump rise, they seem to do so quickly and when they fall it tends to be slow?  Appraisals feel kind of the same way.  In a rapidly rising market appraisers are slow to pick up on the rise, but when prices are falling, they get conservative and offer time value adjustments to the downside.  Appraisers are simply protecting themselves because they have risk.  The last thing they want is a lender accusing them of over valuing property values.

Appraisers concentrate on what happened in the past and must wait on data to reflect on what is happening on the streets today.  It’s a lot like looking in the rear-view mirror, they can tell you where the market has been but not where the market is headed.  Appraisers must prove values with data all the while mitigating risk by being caught in a rapidly changing market.

There are things agents can do to improve value with the appraiser as well as sell over appraised value.  It takes an experienced agent to deal with these issues.  Sellers mistakenly believe it does not matter who they list with in a seller’s market.  It always matters who you list with, and now is no exception!

Experienced buyer’s agents are counseling buyers on what it takes to score a property today.  We are seeing multiple offers and many times the winning buyer will pay well over asking price.  Buyers are being counseled it may or may not appraise depending on the appraiser and the buyer will have to pay the difference.  The lender will lend based upon a loan to value ratio of the appraisal.  This does not stop the buyer from purchasing, but it might raise their down payment.  Lenders are now counseling buyers too that homes are selling for more than appraised value in many cases.  Real estate appraisal values simply are not keeping up.

Sellers are not accepting as many repair items after inspection either.  They do not have to.  If the buyer backs out there may be 10-20 other buyers willing to pick up that property the day it falls out.  In fact, many buyers are scoring deals simply on the fear of greed of a previous buyer who backs out.  Sellers have the upper hand right now.  Buyers are not really in competition with the seller, they are in competition with all the other buyers that would love to have their deal.

You never want to go back to sell a property a second time, unless the first buyer is not being reasonable or if the line of backup buyers is stronger and more motivated than the first.  This is one reason we spend time on selecting the best 1st contract.  We evaluate how likely this buyer is to complete the sale. We look at pre-approval letter, amount down, amount in escrow, and all terms.  The offer tells a story and prompts questions.  We may call the lender or ask further questions to help the seller make the best decision for them.

For buyers it helps to work with a team that represents a lot of sellers, because we know what listing agents are looking for in an offer, and we can help structure your offer to be more desirable.  Remember, your offer not only has to be acceptable to seller, it must beat out all the other offers.  Price is just one term among many the seller and listing agent looks at.

If you are looking to buy and sell, give us a call.  Brett and Sande can be reached at 239-489-4042 Ext 4.  We’ll be happy to talk about your situation and give you the advice you need to succeed. Visit www.SWFLHomevalues.com to see what your home is worth.   Good luck and Happy House Hunting!

See last week’s article “Correctly Priced Homes Selling with Multiple Offers”

SW Florida Real Estate Market Update September 2020

Appraisals an Issue Once Again

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Real estate agents have been complaining that appraisers have been under-valuing property again. Recently the National Association of Realtors listed the Cape Coral – Fort Myers real estate market as the #3 fastest rising home price markets in the country. Appraisals an Issue Once Again!

Appraisals an Issue Once Again

Appraisals are one person’s opinion of value based upon recent sold data.  The problem is in an upward rising market, past sales are yesterday’s news and today’s values are higher then a few months ago.

In a declining market appraisers are quick to make a time value adjustment as sales from 3-4 months ago would be worth more than today’s market.  Appraisers aren’t as quick in a rising market if you ask many real estate agents, and therein lay the problem.

Buyers and sellers quite often sweat out the appraisal which unfortunately doesn’t always occur right after the contract.  Many sellers are requiring the appraisal number to come in within 15 days of contract acceptance to remove this obstacle.

Typically a buyer gets pre-qualified for a loan and then goes out shopping for a home.  With inventory so limited in SW Florida it’s getting hard to find suitable homes in a buyer’s price range, and when you do find a home for the buyer the buyer isn’t holding all the cards.  The sellers are pretty much able to dictate certain terms as there are several buyers looking at the limited inventory in some price ranges.

The banks usually order the appraisal from an appraisal management company who hires the appraiser.  The management company serves as a middle man to keep the lender from influencing values.  A problem is if the appraiser is not local or is unfamiliar with the area, or simply chooses bad comparables, there isn’t a good way to fix a bad appraisal.  The bank is typically stuck with that number, so the buyer is stuck, unless they’re willing to switch lenders.

We work with one local lender who has access to 3 appraisal management companies, so if we get a bad appraisal from one company they can seek another opinion without being stuck.  This does add time to the process though and isn’t ideal.

This forces sellers to take the best possible buyer, and price isn’t always the most important issue.  True enough, in a tight supply market, all buyers are going to be at a high price, but what really makes a buyer stand out from another buyer are the “Other” terms, like closing date, and amount in escrow.

If you have a buyer putting 20% down but only putting $1,000 in escrow it looks suspicious to a seller.  The escrow money is counted towards the down payment money anyway, and it is refundable if the buyer cannot get their financing assuming the contract is written properly, so sellers ask themselves, “Why isn’t this buyer putting more money down upfront?”

If a seller has 2 or more offers and one has $10,000 in escrow and one only has $1,000 down, which offer sounds better?  Even if there isn’t another offer Yet it still screams weak offer and throws up a red flag.  In a competitive market where a buyer isn’t in competition with the seller but rather with others buyers, it pays to make your offer look strong anyway you can.  If you’re financing there is a limit to how high you can go because it has to appraise.  Do the other things to make your offer stand out.

Listening to your agent will help.  If you don’t make your offer stand out, you’ll be on your 4th or 5th favorite home instead of your 1st, and in this market many times there aren’t more than 3 to choose from.

If you do run into an appraisal problem, there are things you can do.  Perhaps the seller may consider pre-paying the mortgage insurance which might eliminate the need for the property to appraise.  Speak with your agent and lender about these options.  Don’t let a bad appraisal Kill your sale.

Good luck and Happy House Hunting!!!!

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