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BUYERS LOOK FORWARD, APPRAISERS LOOK BACKWARD

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Real Estate Agent with Washington Fine Properties - Washington DC Area Real Estate

BUYERS LOOK FORWARD, APPRAISERS LOOK BACKWARD

With inventory at an all time low in Potomac, Bethesda, Rockville, Chevy Chase MD & Washington DC, home buyers are stepping up and creating a new market with better prices than we have seen in a long, long time. The tides are turning and some are even calling this spring a sellers market. While buyers and sellers are moving forward with the market, there is something holding the market back: the appraisal.

Appraisers work backwards using comps from a different market (last fall and summer) and are currently holding the market down? They have stringent guidelines to follow and heavy oversight from the banking industry. The agents involved in the transaction can provide  market comparables, a list of upgrades, the story behind the sale (multiples, market demand) and other materials that are pertinent but it will not necessarily change the outcome. Appraisers have been forced to be conservative and are very scared to make a wrong move or over appraise.  

What is confusing is that sellers are getting multiple offers on their homes and some are even selling before they go on the market. Traditionally, a home is worth what a buyer is willing to pay. That logic is being tested. Today, a house is only worth what an appraiser is willing to appraise. Of course a buyer can overlook an appraisal and add more cash to the deal but many buyers will try and renegotiate a new price. It can really ruin the flow and good will in a transaction. Eventually, the appraisals will catch up to the new market and prices. Until then, it can be very challenging and costly for buyers and sellers!

 

 

Posted by

The Schuman Team at Washington Fine Properties

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Comments (14)

Tracy Oliva
West USA Realty - Arizona - Fountain Hills, AZ
The Oliva Team Arizona Agents

Betsy: This makes a lot of sense to me,  keep up the good work and good luck with your business in 2013,  E

Mar 12, 2013 10:19 PM
Carol Zingone
Berkshire Hathaway Home Services Florida Network Realty - Jacksonville Beach, FL
Global Realtor in Jax Beach, FL - ABR, CRS, CIPS
I have had one buyer pay more than appraised value, but the majority of my buyers are not in that position.
Mar 12, 2013 10:22 PM
Michelle Francis
Tim Francis Realty LLC - Atlanta, GA
Realtor, Buckhead Atlanta Homes for Sale & Lease

Betsy, 

Good point.  Part of the appraisal does take into account absorption rate and how the current market is.  While I am sure it will continue to be a challenge, thank goodness it is getting better. 

All the best, Michelle

Mar 12, 2013 10:58 PM
Nina Rogoff
Boston, MA
Wix Websites for Real Estate Agents

Good morning, Betsy...This is an excellent post that adds a caution to a sellers' market. We have houses flying off the market in Sharon MA too, with multiple offers coming in at or above list price. One agent said to me the other day, "I hope it will appraise."

Mar 13, 2013 12:09 AM
Debbie Reynolds, C21 Platinum Properties
Platinum Properties- (931)771-9070 - Clarksville, TN
The Dedicated Clarksville TN Realtor-(931)320-6730

Keep up the good work on your blogging. It will pay off. Debbie

Mar 14, 2013 01:38 PM
Patricia Kennedy
RLAH@Properties - Washington, DC
Home in the Capital

Betsy, it seems like they are starting to make time adjustments to reflect the rising market, at least we're seeing a lot of that in the District.

Mar 14, 2013 02:05 PM
Beth and Richard Witt
New York, NY
The best Retired Brokers !!!!

Excellent point Betsy... Have a Happy Day...

Mar 16, 2013 09:33 PM
Sandy Padula & Norm Padula, JD, GRI
HomeSmart Realty West & Florida Realty Investments - , CA
Presence, Persistence & Perseverance
HVCC is one of the major problems, which is rooted in the primary problem...our Federal Government which believes it must protect us from ourselves and does not understand basic economics.
Mar 16, 2013 09:39 PM
Betsy Schuman Dodek
Washington Fine Properties - Washington DC Area Real Estate - Potomac, MD
SearchPotomacHomes.com

Thanks for all the great responses!!! I really appreciate you all stopping by to read my blog!

Ed - Thank you for the kind well wishes. Here's to a doing lots of deals in 2013...with no appraisal issues!

 

Carol - the two appraisal issues we have run into the buyers were putting down quite a bit of money (almost 50%). For my typical buyer this would be a HUGE problem if a seller wouldn't renegotiate.

 

Michelle, so great to have you reading my post. I always enjoy yours! You are right, we are going in a good direction, up!

 

Nina - hope the house appraised. I hope the appraisers wake up and see what is happening NOW in the market!

 

Pam - hello and thanks for stopping by! Both my buyers decided to move forward because the sellers weren't budging on price. Luckily they were putting 50% down! 

 

Debbie - Thank you for the kind words. I am very motivated to do contests so this 31 in 31 is perfect for me. I will have to have my own contest in April :)

 

Pat - the District seems to be ahead of Suburban MD in this (and many) regards. Lucky you!!!

 

Richard & Beth - hope you are not experiencing these issues. It can really put a damper on a good transaction.

 

Norman - I understand that economics plays a large role in the industry. I also know that it's good common sense that if homes are selling before they hit the market or with multiples, that signals a rising market. Why appraisers are looking backwards for the comps is beyond me???

Mar 17, 2013 12:33 AM
Patricia Kennedy
RLAH@Properties - Washington, DC
Home in the Capital

Hey, Betsy! I included this post in Last Week’s Favorites.  Please drop by and check it out, and enjoy the rest of your weekend.

Mar 17, 2013 02:26 AM
Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

It is always a problem. We tend to forget that appraisal is not an opinion of value of the property today, but rather the opionion of the value of what this property would be worth if the market has not changed in the last 6 months. In Sellers market you have trouble appraising it for what people are willing to pay (isn't it Market value?) and in Buyers market you have trouble doing a short sale, as they set the value higher than where the market really is.

Mar 17, 2013 09:16 AM
Gary Frimann, CRS, GRI, SRES
Eagle Ridge Realty / Signature Homes & Estates - Gilroy, CA
REALTOR and Broker

We've been havbing probloems with appraisals for quite a while in Silicon Valley.  One's person's opinion can kill the whole transaction, and shave thousands off a seller's take.  it is a shame.

Mar 17, 2013 04:27 PM
Debbie Gartner
The Flooring Girl - White Plains, NY
The Flooring Girl & Blog Stylist -Dynamo Marketers

Yes, as the tides change towards more of a seller's market, the appraisers may be constantly behind.  Let's hope they catch up or come pretty close soon.

Mar 17, 2013 08:10 PM