Its probably happened to you before, but last month I experienced the appraisal dilemma for the very first time!  I'm not new to the business, and I've heard the stories of appraisals coming in low and deals falling apart, but I always thought it would happen to someone else...right?

My clients and I, after months of searching, finally found the right home near Woodstock in Portland, OR.  It needed some work, mostly cosmetic, but it came with a huge lot in a neighborhood of traditionally small lots.  They wanted that, as did many other buyers because we competed with multiple offers.  My clients had their offer accepted and we continued with our inspections.

Everything was fine after some negotiations, but when our appraisal came in 30k low, we had some issues.  I did a market analysis, I looked at the comps, and we were right on the money with our final sales price.  However, due to the lack of comparable properties in that neighborhood, the extra land was deeply discounted on the appraisal because they had to use a formula for its value.  Now, I'm not complaining about the appraisal, because it was good.  I looked it over and I've seen plenty.  The appraiser did a great job.  The dilemma was, and my question is, how do you take into account the demand and "market" value for that property when we are in a declining market and there aren't good comparables?  Obviously, there was a market demand for the property at the original price because there were multiple offers.  However, the unique aspect of the property was hard to evaluate.

The sellers had to come down in price, and we closed, but it was an interesting situation that I'm sure I will face again, as will many of you.

A recent article that I read from Realtor.com talks about the possibility of changes to the current FHA loan situation.  Many First-Time buyers here in Portland have been using FHA loans because of the 3.5% down payment aspect.  This offers the buyer a chance to get into a home without an extremely steep output of initial cash.  I expect to see more tightening of credit in the future and this could be a small step towards that.  It seems that buyers are encouraged to get out there (tax credit, etc.), but discouraged by the credit and banking guidelines.  Which way are we going to sway?

What do you see happening in your city or state?

According to RMLS, "market activity in August showed forward progress compared to August of last year but a decline in activity from last month".  Pending sales are up city-wide to a tune of 13% and closed sales 4% compared to August of 2008.  This is highly driven by the low interest rates that are still available and the $8000.00 tax credit for First-Time Buyers.  Houses at price points below $350K are overwhelmingly competing in a Seller's Market.  Yes, you heard me correctly...a Seller's Market.  Buyers are plentiful at these price points, prices are as low as they will go, and sellers are receiving multiple offers on properties if they are priced near the average sold sales price in the area.  This phenomenon is occurring across the board in NE, SE, SW, NW, N Portland, Lake Oswego and Beaverton.

The Average Sales Price on properties, however, has dropped 10% in Portland since August of last year. This is still leading to longer market times for properties and sellers that are just slightly overpriced. There is just too much inventory on the market for a buyer to overpay. 

On a positive note, we are finally seeing the Average Sales Price of properties increase on a month to month basis.  We had a 2.7% increase in Average Sales Price throughout the city since July.  We have reached the bottom in my opinion, but it will be a long, slow ride until we are seeing prices from even a few years ago.  Economists are predicting a flat market (pricing) throughout 2010 and a cautious increase in housing prices by the third or fourth quarter.

I recently listed this wonderful Willamette Heights property in Portland, Oregon.  It contains 3 bedrooms and 2.5 baths and is located in this peaceful setting steps to Forest Park and NW 23rd.  You can enter two different Forest Park trails within seconds or take a short walk for coffee and breakfast at St. Honore.  Views of the City lights and Mt. Hood are tremendous from the three covered porches that allow you to enjoy them through any type of weather.

This home boasts 3000 square feet, tastefully remodeled to keep all of the great old details of an Old Portland home from this era.  The systems were all redone, including a new electrical panel, and the master/main bathroom is a beautiful, full remodel.  This home is listed at $659,000.

This home was one of 33 Willamette Heights Homes designed by Emil Schacht for the Lewis and Clark Exposition attendees.  The site around Montgomery Park, which is viewable from this home, was where the exposition was held in 1905.  The homes and land in the area would have been an incredible sight.  Today, this area and its views, proximity to one of the greatest parks in the United States (Forest Park), and proximity to the shopping and entertainment in NW make Willamette Heights unique.

This wonderful home at 11 Hillshire Dr. in Lake Oswego was listed Friday for $889,000.  This four bedroom home includes a large bonus room/5th bedroom, two full bathrooms with one half bath, and plenty of remodeled details.  This is a luxurious home in the Westridge area close to Lake Oswego Schools and Parks.  See more pictures online.

I do a lot of work in the Hawthorne neighborhood, and I live there too!  This little darling bungalo is listed at $325,000 and is conveniently located two blocks from Seawallcrest Park and a few blocks from some great restaurants such as Lauro and Pok Pok.  Homes in this neighborhood sell quickly if they are prices correctly for the condition.  This home has newly finished fir floors, new carpet in the bedrooms, an updated kitchen, a wonderful front porch, and a tidy, calm backyard.

Hawthorne properties are in demand for my clients and I generally have plenty of buyers looking in the neighborhood.  Its a wonderful place to live in my opinion, and a desireable community to buyers that understand the amenities of the area.

I just listed this wonderful Westridge home in Lake Oswego, Oregon at $569,000.  Its a 4 bedroom, 3 full bath beauty that is across the street from Westridge Park and Westridge Grade School.  The people that live here can send their children to award winning schools, and enjoy the serenity and running trails at the park.  Built in 1978, this home has been updated in all the important areas.  It boasts hardwood floors, a formal living room and two informal living areas with two fireplaces.  The kitchen was updated and includes a new oven, new refrigerator with in door water and ice.  2862 square feet of living space makes this home spacious.

The exterior is an approximately 12000 square foot corner, fenced yard that has been professionally landscaped.  It contains a sport court in the corner of the yard and the deck with hot tub separates the court from the large grassy space.  There are few homes in this neighborhood, if any, that have this much home for the money.  More pictures.

This is my eldest daughter contemplating the reality of her brand new sister that was born last Thursday.  I see this look in adults a lot lately, as the Real Estate world changes all around them.  I mostly think this is a funny shot, as it was not staged.  She looks absolutely exhausted!

January’s stats just came out, and it’s not surprising that things are slow in the market.  Despite the fantastic buyer’s market that we are experiencing, we are missing one important ingredient: Buyers!  That statement is not entirely accurate, because the market seems to be picking up.  Now, we have a lot of inventory and not enough buyers.  Last month, we had an increase in the number of pending sales (52% vs. December), yet we had over 120% increase in new listings.  Therefore, our inventory has increased, despite the increase in “prospective” buyers.  And, of the 4196 pending sales, only 732 (or less than 1 in 6) actually closed.  This is a significant number...what happened?

Loans are harder to come by and people are worried about losing jobs.  It’s as simple as that.  At a time when traditional buyers should be able to purchase a home, they just can’t find the loan or the job security to do it. We will continue to see small percentages of closed homes while consumer confidence is low and while banks are afraid of lending.

On a positive note, we aren’t hurting as much as most of the country.  MSNBC again rated Portland, OR as one of the top 5 Real Estate Markets in the country along with San Diego, Washington DC, New York, and Charlotte. 

If the bailout works, and lenders free up credit, I would expect to see a higher percentage of these pending sales close.  This would, of course, lower our inventory and make sellers a lot happier

Folks, it is a wonderful time to buy a home in Portland, OR.  Whether it is your first home, second home, or even an investment property, you will rarely find a market better than our current market.  Interest rates are in the 5% range for 30-yr fixed loans, prices have dropped, and there are a lot of homes on the market.

According to RMLS, we have 14.1 months of inventory at our current rate of sales, and sales have fallen by over 30% from December 2007 to December 2008.  This means that sellers must be very competitive in their pricing, and the condition of the home must be ideal.  I see many sellers that have homes sitting on the market because they aren't prepared to price competitively or make changes to the condition of their home.  So in a sense, the inventory number of 14.1 is misleading because some of these homes just aren't in the game.  We have an interesting dilemma from my perspective.  Buyers have a fantastic position in the market, but are tentative because of the current economic situation.  Sellers want to sell, but some can't adjust prices because they might end up losing any equity that they have in their home.  The best way to sell is to get your home in great condition, and price it near or below comparable properties.  It simply has to be the most enticing home on the block! 

As of right now, only West Portland has seen an increase in home prices (1.9%) from the last 12 months compared to the previous 12 months (December 2006 to 2007), and I am confident that will disappear next month.  So what do we do?  Well... if you sell high, you are going to buy high.  Conversely, if you sell low, you are going to buy low.  There are still plenty of opportunities and strategies to do well in this market, you just need to look at the numbers and get the right advice!