Buyers and sellers are frustrated because "it did not appraise"

By
Real Estate Broker/Owner with Blackburn Coastal Realty
The Tampa Bay market, like the rest of the US and elsewhere,crashed.  However, those of us on the Gulf of Mexico coast had a second crash....April 2010 the Horizon Explosion and the resulting oil spill panic.  Real estate came to a standstill while everyone was trying to figure out how much we were damaged.....80% cancellation rate in our booming summer tourism market right after the spill.
Everyone panicked and property assessments by the county crashed.
 
Market prices of homes are advancing now but that is fairly recent....nice areas have seen the market prices improve up to 50% since the "second bottom".  Many nicer homes are selling at double the county assessment.  Appraisers are handcuffed by their own rules....basically comps based on actual sales in the past, like up to one year.  Market prices have outstripped this lag in appraised prices.  All financial institutions lend on Appraised Value not market value nor contract price.  Appraisals are almost always below the contract or market prices (no so in marginal areas).  When arranging for financing you will fail if you expect the appraisal to justify the price paid.
 
What I tell everyone is this:  Plan on putting more down than you expected.  For example if a property sells for 300k and it appraises for 250k, the institution lends a percentage of 250k THEN the buyer has to put up the extra $50k in additional cash down.  That is why Tampa Bay residential properties are closing with 50% being cash transactions overall with waterfront properies at the beach at 75% cash.
 
The effect of all this is that all purchases are by people who "can afford it+".  There has not been this much equity going into home purchases since the depression.
 
If you don't live in a hot market (previously a depressed market) it is hard to understand (for buyers and their lenders).  Best to educate lenders, buyers and sellers up front!
 
Posted by

William B Blackburn, Broker

Blackburn Investors Realty, Tampa Bay, Florida

JD, GRI,CDPE,CIPS

www.BlackburnInvestors.com

727-322-2900

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Topic:
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Florida Pinellas County
Groups:
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Tags:
appraisals
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Rainmaker
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Lora "Leah" Stern 914-772-4528
Coldwell Banker, 170 N Main Street, New City NY 10956 - New City, NY
Real Estate Salesperson

William, interesting problem.  In my neck of the woods prices have not risen much though they are selling closer to list price than they had been and with fewer days on market.  Appraisels are coming in fairly close to contract price so we don't have only cash rich people buying.  Sounds like you need to spend alot of time educating would be buyers about the possible pitfalls in order to get a deal together.

Jun 07, 2013 05:56 AM #1
Anonymous
Bill Blackburn

"Be careful what you wish for".....suddenly hot markets are problematical.  Your are absolutely right about education about the real market....it is not what is printed in the news.

Jun 07, 2013 10:10 AM #2
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Rainer
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William Blackburn

Blackburn Coastal Realty, We work at the beach.
We live and Work at the Beach....we know the Tampa Bay Beaches
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