Our office, Fuller Sotheby’s and Kensington Mortgage, hosted two very established and well-respected appraisers at our company meeting a month ago. The purpose was for the appraisers to give us a state of union speech and for realtors to ask questions about what, where, and why. We have all seen massive changes in the appraisal business since the real estate crash and many professionals including myself are scratching their heads on a regular basis, trying to figure what an appraiser is thinking. Most people know about all of the reforms that the lending side of business has gone through, but few realize that appraisals and appraiser come in a close second when we talk about industries turned upside down.
With that said, lets hit a few highlights that were covered during the hour and half symposium because the information affects us all.
1) The number one piece of information I summarized was that in most cases, buyers are getting the price of homes correctly. Remember, the appraiser’s job is to confirm or deny the current market conditions on behalf of the lender loaning the money to the buyer. If the buyer has offered $230,000 for the home, it’s the appraiser’s job to confirm or deny for the bank that it is the current market value for that home. “Current Market Value” is the key word. They are charged with the job of finding an exact “match” to the home that is under contract to prove the current market value. Remember in the first sentence, I said that buyers are getting values correctly. What we need to keep in mind is that the buyer has seen more homes in the market than anyone else in the real estate equation. Many times, they know better what you can buy for the money than the listing agent and the buying agent. The days of buyers overpaying for a home are long gone. They are too smart, too savvy, and have done more homework than anyone involved. So in most cases, these appraisers are telling us that the buyers are getting the pricing correctly and judging well the current market conditions.
2) Ninety days is the new norm. Appraisers need to use comparables in your neighborhood that are not older than 90 days. If there are none, they can first move out of your area, or second, take a look at something older than 90 days. The days of applying a comparable from 12 months ago have been gone for two years and now the sold property from 6 months ago is an extinct comparable. Sellers better hope that something has sold in their neighborhood in the last 90 days or appraisal could be an issue.
3) Price per square foot doesn’t matter. Most real estate agents already know that appraisers do not use price per square foot for an evaluation. It has almost no bearing on the appraisal. Problem is, sellers and buyers use price per square foot when buying and selling. The message here is that price per square foot has never been and never will be a good predictor of value. There are just too many other intangibles when it comes to arriving at a fair market value of a home.
That was a lot more great information that I just don’t have enough room for here so if you would like to contact me, I’ll be happy to share it with you.
Dan Polimino is a Realtor with Fuller Sotheby’s International Realty. He can be reached at DPolimino@fullerproperties.com and www.coloradodreamhouse.com/denverpost
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