Comments on: Appraisals in a down market

By: FPE

FPE — Tue, 09 Jun 2009 15:39:58 +0000

Many homes in foreclosure have been trashed and need to be fixed before they can be moved into. As we all know, many homeowners cannot afford to pay their mortgage at this time. If homeowners can’t afford to pay one mortgage, of course they can’t pay for two mortgages while they wait for repairs to be done to their next house.

An investor is often the only one who can manage to buy and repair. An investor is able to do this because he has the potential to make a profit when he sells the newly rehabbed home.

A good investor does not invest in something he thinks will not give him a return on his money. If the appraisals on the uninhabitable foreclosed homes go up and the appraisals for the rehabbed homes go down, eventually there will be no way for the investor to make money fixing homes. At that point, it will only make sense to invest the money somewhere else.

Many factors need to be considered when appraising a home. Obviously, it will not help our economy recover if appraisers compare homes- regardless of condition- as though they were both apples of the same kind.

By: Bill York

Bill York — Wed, 27 May 2009 20:36:27 +0000

In this market, there are a couple of ways property can be appraised:
1. Fannie Mae short term appraisal to produce a distressed (commercial or wholesale)value of property for a quick sale.
2. Non-distressed (retail) value of property with normal market conditions.

Until the distressed inventory shrinks, values will continue toward the lower values. America is on Sale. Homes selling below replacement value are good buys even if we are not at the bottom. If you try to pick the bottom, you will probably miss out.

By: R. Kolb

R. Kolb — Sat, 16 May 2009 23:21:29 +0000

I think that most real estate brokers and bankers are thinking about their money pocket and to hell with their clients. I have heard recently that older homes in foreclosure, or by listing, end up with 20 or more bidding offers. So why dont the “Sellers, Banks and etc. just put the homes on the market and let it go out to the hightest bid with the option of pulling it off if the bids are not sufficient.

By: MJB

MJB — Thu, 14 May 2009 02:30:14 +0000

We may have a little different situation in the S. FL market. Apparently, Freddie Mac requires that you claim a hardship (significant loss of income), or being several months in arrears on payments, or–and here’s the interesting part–the house is appraised at no more than 105% loan-to-value before they’ll consider reworking the loan. In a market where homes have depreciated as much as 50% or more in value, many borrowers are way over 105% loan to value. So, using “comps” as a guide, appraisers are bringing in estimates that put the value of the home way beyond the Freddie Mac limits (Fannie Mae does not use the LTV formula Freddie does). Additionally, Freddie requires that you restructure the loan with the originating lender (again, not a Fannie Mae requirement). So basically, even though your debt is way over your asset value (pretty much the basis for bankruptcy) unless you ruin your credit by not paying for a while and letting them press foreclosure, you’re out of luck. My father used to call something like that a rigged deal.

By: patientr

patientr — Thu, 14 May 2009 02:25:24 +0000

A foreclosure MAY be taken into account IF it “was on the market long enough to be exposed to a significant number of buyers”.

So some appraisers, when they need to get to a higher number, can ignore the foreclosures? That’s ripe for abuse, and we’ve seen way too many abuses like this already.

Most foreclosures are priced to sell, and so will sell quickly. Now appraisers are coming up with guidance that quick sales can be ignored? Regardless of foreclosures, this obviously creates an upward bias in the prices. When the market was red-hot, homes often sold in days. Were appraisers advising against using these prices in their appraisals? Of course not.

All these scams are so obvious – the goal is to keep home prices as high as possible, for as long as possible. Any argument to justify actions that keep prices high is used, and actions and arguments in the other direction are overlooked.

By: Jc

Jc — Wed, 13 May 2009 21:22:13 +0000

As you all well know
Banks are keeping almost 70% foreclosures-homes, and refusing to sell in an open market, Just to keep the prices up.

So the question is…What do we do?, I can wait, I am in no rush to purchase.

And not going to pay those “Artificial-Prices” I guess I am talking in Behalf of many.

By: Jc

Jc — Wed, 13 May 2009 21:05:39 +0000

I find it interesting all your articles.
But when it comes to appreisals, i am NOT that sure.
Here In Laguna Niguel (where I am) realtors are not complying with the estimates from non of you in this field.

All the Listing -Prices are way over your “Medium-size-Homes of $440,000 Family-Single-Homes
So at this prices they (Realtors) show Townhouses (1 common wall atach)

It is frustrating, Because Realtors/Banks are pressuring appraisers to keep Hiking-prices.