Dreading the day
Did you ever have one of those days when you knew something bad was going to happen for your client and you had no control? 
Couldn't help them thru the situation? Your hands were tied because of the 'rules'?
My intuition was correct one day last week! $33,000 under appraisal recently on a townhome listing that I have. The appraiser said he was stuck because the only recent sales were those of short sales right in that subdivision. This is playing out that way all over my area and let me tell you I'm sick of it!
The people that lost their homes to foreclosure or short sales are setting a market price that is undervalued and the appraisal industry is complacent and are being pressured by the banking industry.
Now according to appraisal industry standards:
"Appraisers technically shouldn’t consider neighborhood foreclosures when valuing a home, since foreclosures don’t meet the Appraisal Institute’s definition of a property reasonably exposed in a competitive market."
Marketing 101 made simple: short sales and foreclosures are always priced at or less than the 30 day price.
Why must all appraisals suddenly come out low? Why are 2nd rate underwriters in Utah reviewing appraisals and asking appraisers to clarify issues on a home 1000 miles away? The banks are now pressuring the appraisers under the guise of the new HVCC regulations and no one is standing up to them.
How can the market get any better in my area if I can't sell anything and get it to close? So even sellers that are transferred and not in financial duress are held hostage and financially bloodied by foreclosures and short sales. There were other traditional sales in the area within the 1 mile radius but they were dismissed and not considered.
The seller has already threw in her pound of flesh with the deal because she paid $305,000 for this house and sold it for $280,000. This was all her equity gone just so that she could be competitive in the market place and take a transfer. She wasn't unreasonable! She priced the home to be competitive! In fact, she was the largest model with the lowest price and still she couldn't win.
Houses in our area do not drop $50,000 in price in less than a year!
The is a big gap to cover in price so I understand your frustration.
Thanks Chuck, very hard for the seller to comprehend and I don't think the deal will be closing anytime soon.
Lyn, It's a sad story and I have had similiar experiences with appraisals based on short sales and foreclosures in the neighborhood. It makes for a very challenging situation for seller.
Lyn,
I know in certain parts of the country where prices have fallen and short sales and foreclosures are the norm it is hard to get accurate appraisals. We are not experiencing this so the few that exit when can throw out. I'm still being cautious and giving the appraiser MY comparable sold homes with the flier, floor plan all the upgrades, survey and plat of the community hi-lighting my listing and the sold comparable I'm using. It's helping. Good luck with this issue for your seller.
Dorie, That's what I've done giving him comparables, floorplans, etc. I always meet the appraisers because you just can't be sure that they are even from the local area any more. Glad you don't have this happening yet in your area.
Barbara: Makes it tough to sell even at a below market price and get to where you are going, it's like being held hostage to your house.
I am so sorry for your seller (and for you). We have had similar things happen and it is extremely difficult to work through a GAP of $33K. We wish you the best of luck - try to stay positive even in this crazy market. Maybe a cash offer will come along!
We are going to subscribe to your blog!
Lyn,
We see this all the time in our area here in San Diego County....but things are getting better here...we were the first to drop in price and are gaining again....Hang On!!
It is very hard to get an accurate appraisal in our part of Central Florida due to all the short sales and bank own property. Hopefully we can wade through all this and get back to normal soon. I just feel sorry for the people who have a legitimate reason/need to sale it this market.
This is a rampant problem all oer he country. Sellers don't understand the issues of what we are dealing with.
Bill: This seller is pretty savvy about what is going on. She just isn't going to sell her house for that price and at this point the buyer is wondering why not? Someday, the roles will be reversed and he'll find out.
Larry: I understand that Florida is rough and so is Nevada right now. We haven't had that much of a market change here. Of course, then there is this!
Bob: Didn't realize that, good luck there as that is a popular area. All we want to do is sell homes!
New rules (HVCC), new game. Those that passed this bill had no idea what the ramifications would be in the long run. Good luck in selling the townhouse. Hopefully the market will turn around for your seller.
Kenneth, yes indeed they sure created a disaster that 'over corrected' the market.