The real estate market on the West Bank of New Orleans has been in a state of flux since Hurricane Katrina. Prior to August 2005, we were seeing a slow, but steady, increase in values across the entire West Bank. Since flooding was limited to just a few affected areas in Jefferson Parish, there was a rush to purchase homes on the West Bank as people began to return to the city...pushing both rents and home prices up very quickly.
After the initial spike in the market, these increases in value have been difficult, if not impossible, to maintain over the long term. An unfortunate side affect is that many people who purchased a non-flooded home in 2006 paid a premium for it. As these homes are coming back on the market for sale, some sellers are finding that they are upside down - they owe more than their house is appraised for.
The standard Louisiana purchase agreement allows the purchaser to make their offer contingent (conditioned) upon an appraisal that is equal to or greater than the purchase price. Financing is usually a contingency as well, with the buyer's mortgage company requiring an approved appraiser inspect your home and determine the current value based on recent comparable sales in the area. Recent means just that. It doesn't matter what price your neighbor got for his house when he sold a year ago. An appraiser will be researching sales within the last 6 months and prefers sales within the last 90 days.
What can you do if your West Bank home appraises for less than the agreed upon sale price?
- Cry. Go ahead, I'll pass you tissues and hold your hand until the moment passes.
- Yell. You are welcome to vent about the qualifications (of lack thereof) of the appraiser, but please don't yell AT me.
- Have the buyer pay the difference between the contract price and the appraised value. Take your best shot, but I've never seen this happen except in the buying frenzy post Katrina. Those days are long gone. Stop and think...Would you pay more for a house than it's worth?
- Cancel the sale and go back on the market. Keep in mind that the next appraiser may come up with the exact same numbers. If you are in an area that is seeing declining values, the next appraisal could even be lower.
- Reduce the sales price to the appraisal amount. This is the most common (and common sense) solution. Will doing this cause you undue financial hardship? Then it's time to take the sign down and settle back into your home until the market turns. Please remember that my crystal ball is on the fritz again, so I cannot tell you when that might be.
There is one other option when an appraisal comes in low, and that is for your REALTOR® to provide additional comparable sales for consideration by the appraiser. Occasionally, this additional information will be considered and result in an adjusted value, but it is the exception, not the norm.
The best way to keep from being surprised with a low appraisal is to hire an experienced West Bank REALTOR® who will keep you informed about market changes during the time your home is listed. A monthly update of neighborhood sales keeps you on top of things and allows you to adjust your price as needed. If you need more information about setting the right price for your West Bank home, please contact Lisa Heindel, REALTOR®. I'd be happy to go over the real numbers with you.
When buying or selling a home on the West Bank of New Orleans or relocating to the New Orleans West Bank, you deserve local expertise and advice. Lisa Heindel provides full time, professional real estate services to buyers, sellers and military transferees in Algiers, Algiers Point, Belle Chasse, Gretna, Terrytown, Harvey, Marrero, Westwego and more.
Copyright 2008. Lisa Heindel, All rights reserved.
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