Appraisers can Kill an Oklahoma City Short Sale

My team does a lot of short sales in Oklahoma City, and we are on track to close over 50 this year. This may not seem like many in some markets like Vegas or Florida, but for a market as robust as ours it is. First a little bit about our market:

First, we had no buble pricing and our values since 2008 havenot dropped and the median home price has gone up.

Second, our unemployment rate has average 5% this year, and we lead the nation in income growth for metro areas over 1 million.

Last, taking in the whole state we have only 5.7% of homeowners underwater on their mortages, the lowest in the country.

Because of these reasons this is not a rant against appraisers doing a tough job as all of real estate categories are tough this year, rather it is a rant against the rules and some observations about REALTORS® who try to do short sales but don't have the committment for the education as well as the hard work required to have a successful short sale. First, let me give you a few exmaples of the difficulties and what I think needs changing.

Our HAFA Problem. I will save for a later blog the lender issues, but let's stay with appraisers. I have a HAFA I started in February and despite the timeline restrictions it is still going. I just had the appraiser out for the third time for a pricing dispute. The problem is that for a house that should asell for $160K or less we have $50K to $70K in repairs including 24 piers for structure and a very bad roof that insurance won't touch. That's $45,000 just in those two items and we have eliminated most financing except for cash, a bank that loves you. or a full blown 203K. It has taken us 10 months to get the price to $160K from $218K. The appraiser was not allowed to take in absorption rate, the limitation of financing, or the general amount of repairs that could be even higher. The only reason we have the price down is our constant pressure omn both the lender and appraiser. Get this, while I just saw a featured post about low appraisals killing sales, in Greater Oklahoma City, high appraisals are killing short sales.

FHA and Square Footage. In Oklahoma City since we have so few distressed properties, FHA will not allow the appraiser to use any distressed comparables on the price consideration. So six months ago we listed the property at $150K, no showings. Then we lowered it to $145K, no showings. Again we lowered to $140K, no showings, and finally $135K and contract! The price was lowered over two months of prime summertime sales. One month later we get the appraiser out, show him that distressed sales were the only sales in the neighborhood in the last 60 days, show him that the formal dining and second living area were not desirable for the typical buyer, showed hiome the price reduction timeline, the showings that only happened after the $135K price, and left feeling good. Two weeks later the appraisal came in at, you guessed it, $140K. Now 4 weeks later, you guessed it, no showings. Doesn't the market set the price? Since the appraiser doesn't but the house at the price he sets, and since square footage is all he can use, and the foreclosed homes indicative of market conditions, the result may be foreclosure for the owner, and ultimately, less money for the lender since it may be a year before they get any money in a forclosure sale.

Conclusion. Appraisers need some new rules. If the idea is to save the homeowner from foreclosure, avoid empty houses that can be vandalized and look unkempt, keep away a lower foreclosure price that may bring non-distressed sellers to a negative or neutral equity postion, and the least amount of losss to the abnks we bailed out, then the system is wrong. You can say don't trust the REALTOR® who just wants a commission, especially since the work hours for short sale are the longest in any transaction, there is a problem. When you have teams that close lots of short sales and like us have a 95% close rate, then we need to be in on the decsions. We don't fire slae these properties looking for an easy score, our price drops are timed and based on showings and feedback. Yes, there are some short sales that can't be closed even from the best agent, but when they are avoidable and in every ones best interest, the appraisers need to collaborate with us and more criteria needs to be added into the mix.

Now my REALTOR® Rant. When I meet the appraiser or a BPO agent on a short sale I get the same reply from both, I am surprised you are here. In Oklahoma City and maybe elsewhere, REALTORS® are doing short sales where representing a homeowner in distress can mean foreclosure and a further credit meltdown for the whole family's future, you have got to go the distance and be there for everything. I am shocked that so few show up for the appraiser or BPO agent on a short sale, realizing that so much is at stake. No we cannot manipulate or signle hadedly set the price but we do have influence and can answer questions, show condition of property problems, discuss excell inventory issues and what is and is not selling. We can make a difference, and we have been able to dispute pricing and help the homeowner. REALTORS® please remember, the victory is not in getting the listing, the voctory is saving a family from foreclosure and giving them a brighter future to look forward to.

If you are a financially distressed homeowner in the Oklahoma City area we want to help you with all your options toa void foreclosure including a short sale. Contact us at joe@joepryor,com or visit our website devoted to the differences bewteen foreclosure and a short sale at www.avoidforeclosureoklahoma.com.