Do You Know What Your Home is Really Worth?

One of the most difficult things for sellers to understand is the difference between a refinance appraisal and a purchase money appraisal.

Oh well.

JIM  -  The Phoenix market area (and surrounding cities) has sellers in the same situation, knowledge wise, as those in your area.  The vast majority have no idea what the value is on the home they are selling, and neither do the majority of buyers for that matter.  It is quite common for them to rely totally on what their agent tells them, and then can't comprehend why it takes so long for the property to sell, or in the case of buyers, why they have to put more down then originally led to believe.  You provide several good points that sellers (and buyers) need to know.

LENN  -  Out of curiosity, what do you percieve is the difference between a refinance appraisal and a purchase appraisal?   

JIM...

I just cannot inderstand the mentality of refusing to counter a low offer. You have someone who has seen the property and you dismiss their interest because they "hurt your feelings?" Or they counter over list price to teach them a lesson. It makes no sense tome whatsoever.

Jim - You are exactly right...  I turned down 3 listings last month because the seller's "wants" weren't in tune with reality.  One of those homes has already been listed for at the price I wouldn't agree to.  Obviously, someone else told them what they wanted to hear.

Lenn Harley, Homefinders.com, MD & VA Real Estate  Lenn you are so right.  A lot of sellers feel like they've been had when I explain hte facts to them.  The HELOC or refi sometimes is much more than a market value.

David Hintz - AZAppraiser (Arizona Appraisal & Consulting)  Thank you.  If it a really unique property I suggest the seller get an appraisal.

Richard Weisser, Associate Broker, E-Pro ERA United Realty, Auctioneer, CE Author (Coweta Fayette Real Estate, Inc. ERA United Realty)  Too bad it happens frequently with inexperienced agents not knowing how to advise their sellers.  The agents often become very emotional during negotiations and it really causes them to lose their objectivity.

Debbie Summers, Licensed Real Estate Professional (RE/MAX Central Realty Lake Mary, FL)  It is amazing how sellers find comfort in those that will lie to them, and simultaneously lock themselves into a property that is virtually unsaleable.

Jim, this is a great list for a seller thanks for sharing it.

 Patty & Scott Carroll - RE/MAX, Vancouver WA (RE/MAX Equity Group)  Anytime!

Jim - I like your point here: "focus on sold homes prices in the last three months only" 

The emphasis should be on the word sold.  So many home owners assume that the listing price is what it was sold for (and then don't forget to subtract concessions of those sold homes)

Jim,

Homes will take a lot longer now because the market is fooded with properties in foreclosure...short sales and over priced listings. Thankfully..I have a few that aren't selling but aren't in tht situation.

Jim,

A little different creature up north in Northern Michigan where we had freeze warnings 3 nights last week.  I commonly refer in my appraisal reports to the "annual winter dormant marketing season" which spans from October through May.  Market sales volume begins to show in late May as the early buyers are now closing their deals and continues through October when the season's end buyers are closing their purchases.  November through May has very limited sales volume making it difficult to review sales from 3 months prior.  On the up side, our market has had relatively stable values for the past 3 seasons.

Sara Goodwin - Portland, Oregon Appraiser (Ashcroft & Associates) The problem is that most agents don't know the difference, and they erroniously focus on listed invertoy rather than solds.  That's very dysfunctional.

Neal Bloom-Realtor ® Assoc.-CRS-Weston FL (RE/MAX Premier Associates)  I think to some degree this the state of the nation.  Some places are better than others, but the one thing folks needs is a reality check before just throwing a "for sale sign" in the yard.

Richard Glesser (North Country Appraisal Services)  Sounds like you are in a normal market.  That is a great things.  In the south our market used to be year round, and slow near the holidays.  In hte last several years the peaks of activity in our market are more like yours.

Our market research has shown that, due to the stable values during the past several years, properties should be listed based upon selling prices up to the last 3 years.  The secondary market doesn't accept that, but the excessive number of listings when compared to sales is due to sellers listing their homes with 3-5% appreciation per year during the past 3 years which has not happened in the market as it did the previous 10-15 years.  As a result, it appears to be an over-supply of listed homes while the properly priced homes are indeed selling.  The volume in the listing data base is due to sellers listing at 12-15% above market values.

Sara - Sold prices are an important part of determining a competitive list price for a home, but you can't just look at sold home prices.  The home price needs to be a competitive price.  Looking at solds, pendings and what's currently your competition (active) will give you a better picture of where the market is going and where the house needs to be priced.  If there are 25 similar homes on the market then you need to be priced to compete with those other homes and yes you may need to price it below market value to get offers on your property.  There have been several homes in our area that had appraisals done, but by the time the home went on the market at that price the home prices had already dropped.  So that appraised price no longer applied to the home.  Agents should definitely be looking at more than just what's active on the market - you are right about that :)

 Richard Glesser (North Country Appraisal Services)  I would forget the last three years, it is the current past few months, and the availability of financing that needs to be taken into account.  Most appraisers never question appreciation I would...the fact is that since most of the homes sold in many markets was financed totally withextras rolled in...they kept adding the closing costs 3% on top + extras, + 3% sellers contribution to down payment.  he numbers are all screwed up because folks were not spending their own money.

JIM  -  I disagree with what you said - "Most appraisers never question appreciation".

During the start of the "boom" when prices and values started increasing rapidly, many appraisers including myself were most definately looking at appreciation and the trends at that time and prior trends.  Much the same as looking at depreciating value trends during the market decline.  By doing so, appraisers can see the false increase in values and over-inflated selling prices feeding the frenzy and determine the actual market value of the property.  In order to correctly value a property one needs to look at sales data, listing data, current market trends (1 month, 3 months, 6 months, 12 months), and past market trends (1 year, 2 year, 3 year, -- 10 years) whereby false values can be exposed and determine the actual rate, normal rate, and inflated rate of appreciation or depreciation.  Of course there were many more appraiser, lenders, realtors that were only looking at what was selling and for what at the time, to determine what the next deal would produce.  There were many reports that showed the acutal market value of properties but were ignored due to the feeding frenzy.

David Hintz - AZAppraiser (Arizona Appraisal & Consulting) Maybe I am biased.  Most appraisers in Atlanta used to call me and ask for a CMA.  Hard to believe?  That is correct!  Many of the appraisers in Atlanta never even saw the properties they were appraising.  Not even drive bys.  I was even called by a federal appraiser to explain a deal where a buyer purchased one of our homes, and immediately refinanced it for 175K more..then walked.  Guess what it appraised!  We received at least one phone call every day from appraisers on homes that were not even our listings.  The system did not stick to any rules as evidenced by the massive loan fraud in Atlanta.  I believe that Atlanta is still in the top 6 nationwide for loan fraud.

Jim, your reply to David, the only thing I could say is "WOW". I had to read it 3 times, and I thought the appraisers in Miami were bad! Thats just sick.

Jim  -  Very similar situation in Arizona.  Many used car sales people turned loan officers were getting loans funded strictly on comp checks by appraisers and the word of agents.  I have also done several reviews for homeowners that were suckered into overpriced homes during the boom times (that still had copies of the "valuation" document it was based on), some were CMAs and some were just AVM reports with no visual inspection by an appraiser!!  So I believe what you are saying.

Jessica - Yes, I did fail to mention that pending and active listings are still important in both selling and appraising a home.  I just run across home owners that often assume that if a house was listed for $500,000, it sold for $500,000 when in reality it may have been on the market 9 months and sold for $400,000. 

Jim & David - Our state appraisers board would take away our first born for something like that.  The more horror stories I hear the more I'm actually glad at how vidulant the ACLB is here.

Sara  -  That will happen here also, in less than a heartbeat.  Problem is, they can't act, on what they don't know has been done.  Unless someone files a complaint.

Not saying there aren't terrible and criminal appraisers out there but, in light of the many unethical and illegal practices which are now coming to the surface which have taken place during the past 5+ years, I wonder how many of those appraisals may have been identity theft appraisals where signatures were lifted and placed on false reports or data altered after the appraisal was submitted?  More and more of this is being reported and I can only guess how much is yet undiscovered.

Michael Zollo-Certified Residential Appraiser, South Florida (A-Z Appraisals, Inc.)  True story.  Because our website is so easily found on the Internet, the calls would come in every day.  After a while we had to start screening the calls.  It was really sick!

David Hintz - AZAppraiser (Arizona Appraisal & Consulting) I have even heard of appraisers in GA that were not licensed, but licensed in Florida...and still tried to get their appraisals through.  The system is broke, and now all the nice folks are going to pay for the crooks!  The lenders were also in the know.

Sara Goodwin - Portland, Oregon Appraiser (Ashcroft & Associates)  A lot of states say they were tough on appraisal, but I do not believe it.  We would not have the mass of nationwide foreclosures if the appraisals were correct.  It was sort of like.."what number do you need?"  The appraisal numbers were inflated, and it was routine for appraisers to go outside into other subdivisions that had completely different comparables.   There are entire subdivision in Atlanta where the fraud was so rampant that home prices were pushed up across the board from the mid 150K's to almost 300K.  All solid fraud from flipping homes, and straw buyers.  Taxes doubled making it next to impossible for many retirees to pay their tax bills on a fixed income pension.

David Hintz - AZAppraiser (Arizona Appraisal & Consulting)  I think here it isn't until someone sees a pattern in foreclosure is anything being done.  Most of the crooks are still out there...

Richard Glesser (North Country Appraisal Services)  I would not be suprised at all.  I recently heard of a story where HUD-1 that had a completely diffenent set of numbers...was replaced wiht another HUD-1 in very short order.  It would make me thing what if there were 2 sets of Hud-1's? What about 2 Appraisals?  Sound rediculious?  I don't think so.  In accounting, it would be called "Keeping two sets of books."   One set to submit, the other set to allow the slushing around funds.

Jim, I think all HUD statements should have to be posted, like county tax records. It would cut down a lot of the crap thats been going on. I love when I call a realtor to confirm a sale and they tell me that they can't or will not release any infomation about the sale. Then there are some great agents who post the concessions on their Closed Sale listing or are very helpful when I call them.

PS, I've heard of builders down here passing out bogus HUD Statements

Michael Zollo-Certified Residential Appraiser, South Florida (A-Z Appraisals, Inc.)   This is one of those markets where nothing is surprizing me anymore.  Alos, I agree...professionals always assist other professionals.