Current inventory and sales forecast - December 2007

Here is a new idea!!!

What if the Multiple Listing Service reinvented itself for the future and required all existing and new listings to provide an appraisal at the time the property is listed and also provide an appraisal every twelve months. This would make alot of people think twice about calling their realtors and listing an overpriced property just to see if somebody would pay for it. Listing a house with a realtor does not cost the seller any money but if they had to possibly spend $500-$1,000 they might think twice. Or the realtors could start charging $75.00 an hour plus advertising and they could afford to reduce the percentage at the closing table.

these things would defintely make sellers be serious about selling instead of fishing for some uneducated price buyers...

by they way - i am not a realtor but i am in sales

Interesting idea, beaudroix. I like the second option better, but collectively talking about the amount Realtors should charge for services could violate some Federal laws. Requiring an appraisal sounds too much like more gov't red tape to advance the appraisal industry. If that happened, you would see Realtors running to get their appraiser's license. Currently, with so few sales in the area, it is difficult to find real comps which closed in the last four months. I recently had an appraiser contact me for info on a property which I sold over two years ago, saying it was the closest thing to a comp. That was a totally different market than it is today.

Charging for hourly work up front might be a good thing, but that would quickly be negotiated and we would always have Realtors who were trying to compete and gain listings, who will take the listing at any price, just to get the listing, so we would still have many over-priced listings.

Interesting idea, beaudroix. I like the second option better, but collectively talking about the amount Realtors should charge for services could violate some Federal laws. Requiring an appraisal sounds too much like more gov't red tape to advance the appraisal industry. If that happened, you would see Realtors running to get their appraiser's license. Currently, with so few sales in the area, it is difficult to find real comps which closed in the last four months. I recently had an appraiser contact me for info on a property which I sold over two years ago, saying it was the closest thing to a comp. That was a totally different market than it is today.

Charging for hourly work up front might be a good thing, but that would quickly be negotiated and we would always have Realtors who were trying to compete and gain listings, who will take the listing at any price, just to get the listing, so we would still have many over-priced listings.

Here in Atlanta there are plenty of realtors who get an appraisal as part of marketing the house once they get the listing. It makes for more effective marketing. The problem is appraisals are somewhat subjective in a steady market. I'd hate to be an appraiser in sowal trying to find good comps.

Here in Atlanta there are plenty of realtors who get an appraisal as part of marketing the house once they get the listing. It makes for more effective marketing. The problem is appraisals are somewhat subjective in a steady market. I'd hate to be an appraiser in sowal trying to find good comps.

I'm not so sure that I agree about the appraisal being a good marketing tool. Perhaps in a steady market, yes, but in a declining market, my answer would be no. What an appraisal can do, is help get the seller realistic in his or her asking price. Since the appraisals are subjective, I'm sure that if you get a seller to agree to sell their property at appraised value, a buyer take you on, and will bring in an appraiser to suit his or her needs. ;-) I'm not saying it is right, but this is the real world about which we are talking.

What an appraisal can do, is help get the seller realistic in his or her asking price.

Isn't that 3/4's of the battle though right now? Smart sellers should get an appraisal from an appraiser who is approved with multiple Lenders. This will insure the most unbiased opinion. Also, in a declining market, it's very easy for an appraiser 4-6 months later to offer a new value. They would just have to come in the house and make sure nothing was removed or account for improvements possibly made. Usually they would charge less for a repeat visit.

I'm not so sure that I agree about the appraisal being a good marketing tool. Perhaps in a steady market, yes, but in a declining market, my answer would be no. What an appraisal can do, is help get the seller realistic in his or her asking price. Since the appraisals are subjective, I'm sure that if you get a seller to agree to sell their property at appraised value, a buyer take you on, and will bring in an appraiser to suit his or her needs. ;-) I'm not saying it is right, but this is the real world about which we are talking.

Appraisers should not be able to FUDGE the $$$ amounts one way or the other. They should have a logical calculated way to appraise the house therefore Appraiser A, B & C should estimate within 1% of the same $$$ amount.

I am not saying that any of the appraisers on here do that but would you agree that three appraisers will give you three VERY different amounts...

beaudroix, I do agree that three appraisers will give you three different values on the same property. However, asking three appraisers to get within 1% on value, is stretching it in today's market. In a market with many sales, it might be more likely, as finding good comps will give a good basis for determining value. In a slow market like we have today, the comps are not there, so appraisers will have to go back in time to a different market, or stretch out to other neighborhoods to try and find a comp. Also, right now, you might have a comp lot sell at $80K, right next to a lot which sold 6 months ago for $110K. That person who bought the lot in 2001 for $20K, can afford to sell it at $80K to make the quick sale. You might also have an auctioned lot sell for $65K, just down the street. Let's also throw in a similar lot which sold one year ago for $165K. Getting three appraisers to come up with values varying by less than 1% would be a challenge. They want to show an accurate value, but with comps all over the board, and wanting to show the highest accurate value, they will have a tough job.

The appraised value is determined by the comps, and different appraisers are likely to use different comps, and therefore establish different values.

Mango, you are correct that getting the seller's realistic in their asking prices is 3/4 of the battle right now. However, a good Realtor doesn't have to get a $500 appraisal to determine value. Realtors can perform CMAs to determine value. The problem is two-fold. 1) Some Realtors are scared of losing the potential listing, so they might try to find more value that is actually there. 2) Sellers don't listen to the professional opinion of Realtors. They just keep dialing until they hear a price they like.

Joe that makes sense

Appraisers you have a tough job ahead...

Appraisers you have a tough job ahead...

....you mean compared to the days when they simply were told to "hit the number?"

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In those days, all they had to do was look at the contract and add about 30k. As long as banks make home buyers put 20% down, it still should basically work that way as a house is only worth what someone is willing to pay.

beaudroix, I do agree that three appraisers will give you three different values on the same property. However, asking three appraisers to get within 1% on value, is stretching it in today's market. In a market with many sales, it might be more likely, as finding good comps will give a good basis for determining value. In a slow market like we have today, the comps are not there, so appraisers will have to go back in time to a different market, or stretch out to other neighborhoods to try and find a comp. Also, right now, you might have a comp lot sell at $80K, right next to a lot which sold 6 months ago for $110K. That person who bought the lot in 2001 for $20K, can afford to sell it at $80K to make the quick sale. You might also have an auctioned lot sell for $65K, just down the street. Let's also throw in a similar lot which sold one year ago for $165K. Getting three appraisers to come up with values varying by less than 1% would be a challenge. They want to show an accurate value, but with comps all over the board, and wanting to show the highest accurate value, they will have a tough job.

The appraised value is determined by the comps, and different appraisers are likely to use different comps, and therefore establish different values.

Mango, you are correct that getting the seller's realistic in their asking prices is 3/4 of the battle right now. However, a good Realtor doesn't have to get a $500 appraisal to determine value. Realtors can perform CMAs to determine value. The problem is two-fold. 1) Some Realtors are scared of losing the potential listing, so they might try to find more value that is actually there. 2) Sellers don't listen to the professional opinion of Realtors. They just keep dialing until they hear a price they like.

SJ,

I sold a home last week in Cassine for $570,000. The appraisal came in $22,000 shy of asking. It made no sense at all. The comps the appraiser used did not even support my contract. He had very similar sales in the Grove in the $700's he could have used. It was very odd and very confusing. Lets see, the bank does not want to fund it and the appraiser does not want to make a valid appraisal.... Hmmm... Makes you wonder why we keep doing what we do. Luckily, the lady wants the home and paid the difference. She now is the new comp in Cassine. The best thing I have ever heard about appraisals came from an appraiser. "Most appraisals are wrong"!

appraisals also take into account the declining market value and the declining building cost. in '04 just the opposite happened. what appraisers and shelley are trying to tell you is that your house will be worth less next year than this year according to all trends in the market...that's kind of what happens in a wild up tick or down fall. when people can reap more than 100% value increases and more in a year (month/day/hour) or 2 and then continue to increase value based on investulation frenzy there are plenty of win/loose transactions...seller's won big for awhile and now some buyer's are paying the consequences...not much about appraisals make sense on either side of the swing

SJ,

I sold a home last week in Cassine for $570,000. The appraisal came in $22,000 shy of asking. It made no sense at all. The comps the appraiser used did not even support my contract. He had very similar sales in the Grove in the $700's he could have used. It was very odd and very confusing. Lets see, the bank does not want to fund it and the appraiser does not want to make a valid appraisal.... Hmmm... Makes you wonder why we keep doing what we do. Luckily, the lady wants the home and paid the difference. She now is the new comp in Cassine. The best thing I have ever heard about appraisals came from an appraiser. "Most appraisals are wrong"!

When was his sale in the Grove? Just curious.

I have just experienced the Apprasier Debacle first hand this morning. I had a property that the bank appraised 12 months ago for 2.17m New appraisal came in th morning at 1.42. It almost makes you wonder if the banks are doing this to be able to force us to put more capital in on a loan. Hmmm!

appraisals also take into account the declining market value and the declining building cost. in '04 just the opposite happened. what appraisers and shelley are trying to tell you is that your house will be worth less next year than this year according to all trends in the market...that's kind of what happens in a wild up tick or down fall. when people can reap more than 100% value increases and more in a year (month/day/hour) or 2 and then continue to increase value based on investulation frenzy there are plenty of win/loose transactions...seller's won big for awhile and now some buyer's are paying the consequences...not much about appraisals make sense on either side of the swing

I do not look for my appraisals to predict the future. We are simply asking if the contract in their hand can be supported by similar sales. This appraiser went out of his way to make this sale not work. He had a harder time making it not work then if he would of just used the available comps. Makes you wonder.....

but since banks don't want the properties, and many people cannot come up with the additional cash when they refi the loans, how is that in their best interest? Banks are not allowed to collaborate with the appraisers. The appraisers are just covering their own butts, IMO.

When was his sale in the Grove? Just curious.

Their have been 4 sales in the Grove this year. They are all in the $700's. The last one was 6/13/2007. They are all viable comps. Average per sq. foot is $428.00.

I do not look for my appraisals to predict the future. We are simply asking if the contract in their hand can be supported by similar sales. This appraiser went out of his way to make this sale not work. He had a harder time making it not work then if he would of just used the available comps. Makes you wonder.....

Bobby, I work with appraisers often, and never have a problem with helping them find real comps which would justify a selling price. Just curious if this particular appraiser welcomed the idea of looking at comps you presented?

but since banks don't want the properties, and many people cannot come up with the additional cash when they refi the loans, how is that in their best interest? Banks are not allowed to collaborate with the appraisers. The appraisers are just covering their own butts, IMO.

This appraisal was .9% off of my contract price. I think you are correct SJ. I bet this appraiser has been in hot water....

Bobby, I work with appraisers often, and never have a problem with helping them find real comps which would justify a selling price. Just curious if this particular appraiser welcomed the idea of looking at comps you presented?

No. I was the listing agent. The bank did not want selling agent to have anything to do with selling agent referring appraiser. BTW, the buyer put 50% down. Hmmmmm.......

Their have been 4 sales in the Grove this year. They are all in the $700's. The last one was 6/13/2007. They are all viable comps. Average per sq. foot is $428.00.

Two closed sales in Cassine this year in the MLS. $270/SF and $296/SF. I do not know how they compare to your sale. But the appraiser is required by USPAP to use the best, closest, and most comparable sales to determine market value. NOT the best sales to support your contract price. Going to the Grove for comps would only be acceptable if they were the best, closest, and most comparable sales in the area. To be clear, I am not defending the appraiser. There are alot of really bad appraisers out there. I see awful appraisals every day. I report the worst appriasers to the state. That is the only way to solve the problem. BTW, I am an appraiser, but I only appraise commercal property.

Two closed sales in Cassine this year in the MLS. $270/SF and $296/SF. I do not know how they compare to your sale. But the appraiser is required by USPAP to use the best, closest, and most comparable sales to determine market value. NOT the best sales to support your contract price. Going to the Grove for comps would only be acceptable if they were the best, closest, and most comparable sales in the area. To be clear, I am not defending the appraiser. There are alot of really bad appraisers out there. I see awful appraisals every day. I report the worst appriasers to the state. That is the only way to solve the problem. BTW, I am an appraiser, but I only appraise commercal property.

I am actually the $296 closing. He only had one in Cassine to use. He was forced to leave the community and search for comps. The other comp is one level and not on the same level as my listing. I could see the problem if he was $50,000+ under but $22,000? I just find it very odd. Anyway, buyer bought it and she has now created another higher comp. BTW, no hard feelings about appraisers. My comment was from an appraiser. In conclusion, the problem with most appraisals in a down market is they go back too far. I tell my sellers if they want to find out what something will sell for go back 3 months. If nothing has sold in three months, it is probably too high. Folks really get upset about that. I had one guy tell me I was just trying to "sell It"! Imagine that, just trying to sell it! Most folks that will remove the emotion and listen to their agent will sell their property. I am struggling with this concept with some of my own property. I know what will sell it but can not stomach the drop. I keep thinking it will come back to the "value" I want. Not going to happen. I think our market will be back sooner then we realize but this does not mean we will get back what we paid in certain areas. I think that could be 10 years plus. Seven out of ten clients I sit down with say they will wait until it comes back..... What does that mean? Comes back to what you paid? Comes back to transactions? If you paid too much, it will probably be years before we see the same values of properties purchased in late 2004-2005. You may want a back up plan. I know I am trying to get one.

On a positive note, the sooner everyone grasp the reality of this the faster the market will begin the turn.

I have been in the Banking business for 25 years and have never collected a loan from an appraiser. They always have a statement in their appraisal that their liability is limited to the fee they are paid. An appraisal is simply a document for the file to support a loan.

I do not look for my appraisals to predict the future. We are simply asking if the contract in their hand can be supported by similar sales.

agreed Bobby J. I work next to two appraisers every day and almost every day they tell me, "We are simply reporters of fact." That to me means they are giving a value of todays market condition not next weeks.

Most folks that will remove the emotion and listen to their agent will sell their property. I am struggling with this concept with some of my own property. I know what will sell it but can not stomach the drop. I keep thinking it will come back to the "value" I want. Not going to happen. I think our market will be back sooner then we realize but this does not mean we will get back what we paid in certain areas. I think that could be 10 years plus. Seven out of ten clients I sit down with say they will wait until it comes back..... What does that mean? Comes back to what you paid? Comes back to transactions? If you paid too much, it will probably be years before we see the same values of properties purchased in late 2004-2005.

This is the same mindset in the aftermath of the tech-wreck. There are folks who are still holding $100+ a copy shares of JDS Uniphase in their portfolios and rode it down to $2. With an 8-1 reverse split last year, those shares are worth about $1.75 today--it's been 7 years and they're still waiting for it to go back up to $100. (But carrying costs are minute)

I finally convinced a bud to jettison his dot.com era QQQ (Nasdaq 100) and take the tax write-off against his gains this year--you'd thought I'd told him to put his dog to sleep.

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