I had written a blog some time back about the value of a house with foreclosures making up the comps.
This got little attention within the AR community and only slightly more on my personal blog. What seemed to hit home stronger was the impact of the HVCC fiasco and the relevance that foreclosures are making with appraisals.
The article I had read was written by Kenneth Harney. Within the article he offers up several examples of a system starting to be get hit by the new regulations. One of his examples was of a San Diego developer that was trying to close out the final houses in a 120 unit sub-division. Originally the homes were offered in the $350,000 to $360,000 range. The latest appraisers coming out by the banks were coming in with valuations $60,000 or more below the selling prices. The appraisers who are unfamiliar with local market trends are using distressed sales (foreclosures and short sales of existing homes) as their 'comparables'. Many of the comps were in poor condition and all of them offered fewer amenities.
Another example was of a loan applicant in Wilmington, NC with a house in excellent condition and an unblemished payment looking to refinance into a lower rate mortgage. Her original purchase was made 4 years ago for $160,000 and she had made $20,000 worth of improvements. According to her loan officer, the refinance should have been quick and easy. The home was estimated to be worth between $180,000 to $200,000 according to a local realty expert. When the appraiser sent the bank the value of the house, he used two short sale properties that had both closed in the mid $140,000 range, and a probate sale that had closed around $155,000. The final appraisal that came in on the 'ideal' home was for $149,000.
The problem began on May 1 when the governmnet mandated HVCC requirement came into play. Bank assigned appraisers coming in from outside the area are coming in with low values in order to be sarfe.. Many of these appraisers are assigned by appraisal management companies who are willing to work for fees well below the previous standards. They are also willing to perform home appraisals well outside their typical areas of expertise and familiarity.
Our personal degress of frustraion come not only from the appraisers the banks are sending out, but also the range of values that a home seller may be given either from competing agents trying to gain the listing, or from an appraiser independently solicited by the sellers, for either estate handling or as a means of trying to get an unbiased value in order to properly select an agent.
These are problems that are not going to go away any time soon and as the market continues to be filled with other 'problem' listings, real value for a home is going to be harder to determine.