Are Real Estate Prices Being Held Back?

We have experienced issues over and over and over with HVCC.  I have had two low appraisals and one that came in needing repairs and the appraiser disappeared for two weeks on vacation for the reinspect!  FRUSTRATING!

Hi Cindy and Ed,

I understand your frustration, and I feel your pain. I had the same thing happen to me about 1 week, 2 weeks, 3 weeks, ago. Come to think of it, just about every week since the new law was put into place. It's ridiculous, and it needs to be taken off the books. 

-Lisa

I have a good one, I listed a Bank of America REO for $305,000, BPO and appraisals were in the 350 and 360's respectively to set the list price.    Multiple offers, over 100 showings in 5 days, buyers were scrambling to buy this home that sold 4 years ago for 999,000 and was never lived in.

BofA accepts $363,100 which was the highest and best offer.  Here comes the funny part, the buyer is using BofA for their financing.  The buyers appraisal comes in at $350,000 and he gets a call from his BofA loan officer telling him the great news that the house did not appraise and that he will get to renegotiate.  Remember this is coming from a BofA loan officer AND BofA owns the home.  So essentially, BofA agreed to sell the home for $363,100 but would not finance based on that amount so they took another 13,000 haircut. 

Weird

We are seeing appraisers do the same thing here, most are out of towners who don't even have access to comparables on our MLS

You have to admit you see a listing taken for way way more than it will ever appraise for. Somebody takes the bait buyer wise and then appraiser and his license is the guy/gal who says whoa partner. This is not going to fly. He is the reality in the situation where the sales agent that took the listing has a conniption but it was destined to be shot down in the beginning. And that is why three other brokers did not take the listing or waste the money on over priced inventory. I've had appraisers who are human make mistakes but the ones that have appraised for many years, seen the cycles and are on the ball, you can work with. Not all appraisers need to head to the chopping block and the entire appraisal process does not need to be overhauled. To say the appraiser is holding back the market..they don't make it, they reflect it. The sales report/rundown of competing listings, study of the days on market. That's all they do day in and day out unlike Joe Broker who has a slew of other jobs too like blogging..advertising, marketing and keeping buyers/sellers happy. That's why bankers don't go on to do their own appraisal inspection...they were not full time, licensed and knee deep in the process. I agree if an appraiser flies in from Neptune, way way out of his market, problems are bound to happen. If you thought at listing this will never appraise for what the seller wants and backed off, someone else could be raving about appraisers while you sell the realistically priced ones. The overpriced listings would make yours look like gold, a genuine bargain and to stand out.

Welcome to what happens when career Politicians get involved in business.

It seems everyday there's a new rule put in place by banks or lending institutions.  Every offer we make on a bank owned property has it's own hurdle we have to jump.  There's no uniformity, no consistency, and no rhyme or reason to this market. The thing is, it's not the government making these decisions, it's the same C.E.O.'s who caused the problems in the first place.  That's where the government went wrong in their take over of the banks.  They should have replaced every C.E.O. of every financial institution they had to bail out.  I see no difference between a bureaucratic bank and a bureaucratic government agency.  Good post and best of luck to you.

What's ironic is that the Fed could actually be propping up the market. Moratoriums on foreclosures and funny numbers to keep banks afloat... if banks had simply been allowed to fail, the ensuing collapse would have tanked the equity market to a much greater degree. All that bad debt would be absorbed by the financial sectors involved and the government would have lost a substantial tax base.

The HVCC has become such a problem that we have found buyers doing pre-emptive appraisals prior to making offers, and sellers doing reactive appraisals to refute the buyer's appraisal. The good news is this takes us out of the process completely, no one blames us for a low value, high value, wrong value, you name it.

And when it's our listing, and the lender's appraiser contacts us to gain access for the appraisal, regardless of what the HVCC regulations are, they still want to see the other appraisals. I never hand them directly to the appraiser, but I've heard more than once "I can't help it if they are out on the table"...

Very interesting times indeed.

What do I think?  I think the selling banks sell at the market value no more and no less. Appraisers give an un-biased opinion of  market value, no more and no less.  And the lending banks are not going to lend more than a percentage of that market value. If you want prices to go up you need to find cash buyers that for some reason want to pay more than market price,

Lee County Florida was one of the craziest markets on the way up and we have been among the hardest hit on the way down. You may soon be seeing what we are seeing now....multiple offers, even bidding wars for the low end of the market, and over 40% of our sales are cash transactions. For example, my client bid 165% of the list price for a home (cash) and didnt get it

By the way Im thinking about  Detroit, I saw a 2000 sq ft brick home there for sale at $4500. Im looking for a summer home...Detroit may be the ticket

I think that you are on to something, but there is an additional issue for the Detroit area... the population is shifting away.  There are too many homes and not enough people.  Unless the economy turns around there, it won't get better.

Ed and Cindy:

Your premise that banks are holding prices back may have some merit, as less credit available leads to lower demand and lower demand leads to lower prices.  However, I must point out that I heard very few complaints when easy credit lead to higher demand and higher prices.

Please be aware that appraisers don't write the news, we only report the news.  If an appraisal is based upon the most recent, most similar (in terms of market determinant factors), and most proximate sales and listings available, then the result is a well supported opinion of value.

I thought the whole idea of fair market value was what a ready and able seller would take from a willing and able buyer.  Did I miss something somewhere that changed is so drastically?

Sometimes conspiracy theories aren't as farfetched as supposed. If there isn't a concerted effort to destroy America's #1 investment choice -- an investment choice most of us live in -- then I don't know what.

Are they being held "back" or are they "propped up"? If the banks are holding back 35% or more of their REO inventory and not foreclosing for many months (highest I personally know of is 14 months with no payments) then the banks are attempting to prop UP the prices by rationing REO sales.

The banks and wall st. manipulated the market on the way up and now are still manipulating the market on the way down. Bad faith negotiations on short sales and modifications, ridiculous delays on both short and REO sales, no internal communications and only doing what they are forced to instead of doing ANYTHING because it is either the right thing to do for the client or the economy as a whole. It is lie, rape and pillage as usual.

What would happen if we as Realtors simply STOPPED representing or offering on Short Sales? Most of our Short Sale clients should be seeing their financial advisors and/or bankruptcy attorneys instead of spending their last dime of retirement savings trying to make payments on a house that was NEVER worth what they paid, regardless of what the "appraisal" said at the time and will not be again for 10 to 20 years (if EVER in terms of dollar value). 

The banks are investment partners in the homes that they loan money on but they will never admit this, instead choosing to lay it all at the feet of the homebuyer who did everything right, believed the appraisal and the "market" at the time. If that were not true then why do they hold the house as "collateral" and insist it appraise to purchase price? Even when they agree to a Modification they leave as much of the upside down equity on the shoulders of the homeowner as possible to deal with at a later date.