Declining Market - need help

[Chris Colston]

http://www.floridatoday.com/apps/pb.../BREAKINGNEWS/80226004/1086&template=printart

http://www.floridatoday.com/apps/pb...226/BUSINESS/802260330/1003&template=printart

These are the printable versions of the articles so you can avoid the ads on the pages. Mostly these pertain to Brevard County and ALL of Florida. I'm sorry you are having a problem with the fact that most if not all of Volusia County is considered to be in decline. I can pin point almost to the day when this started to occur (October 2005). The builders will tell you anything, they are in the business to sell houses. The fact that your purchasing an REO property, the fact that there are REO properties to be purchased would or should have the lender on heightened alert. The fact that there are REO properties in an area where there is still a builder should alert someone.

You have been told, by many, that we as appraisers have to consider the overall market where the property is located and who are the "typical" buyers and sellers in THAT market. The truth is, the market where the property you are buying, is located, is in DECLINE. There is no telling when the recovery will start or when the over all market will begin to stabilize.

We have no control of what the lenders do once they receive the appraisal report. We have our guidelines and regulations and they have theirs. Your particular house may no longer be in decline, as an REO, it might actually be at the bottom, there is no way to know. The builder could pull out, the builder could start offering to include a 2008 Mercedes Benz with every purchase, the builder could decide to slash prices below what you are about to pay. All of those "coulds" would also influence the value of your house, possibly further down.

My advice, if this is the be all and end all house for you, buy it, put the 5-10% down and enjoy the Florida weather. The values will start up again some day, we just don't know when.

 

[Randolph Kinney]

The home is an REO home in Volusia County, FL 32713. Appraisal came in at $355k noting declining market and surplus of homes.

Sold
7/04 $226k 10/07 $320k
11/05 $384K 03/07 $400k
12/05 $469k 02/07 $470k
11/05 $347k Current appraisal, this is the home I’m buying $355k

For Sale
Sold 4/04 $294k Active listing $299k

Hi Tracy,

How does your data from the county assessor validate you are comparing similar home? Your purchase appraised for $355,000. The one listing you have is $299,000 which is substantially lower in price than what you are purchasing. Is that home truly similar to yours?

The first thing to do is collect data for similar properties, similar locations, for example, design, quality, condition, livable area size, year of construction, etc., that match your property and that have sold in the last 12 months. You have to look at days on market (exposure time), buyer and seller motivation (is it representing a market value sale?), any seller concessions, etc., or whatever that can influence the value.

After screening the data, you have to analyze the data for trends over time as compared to current listings that are similar to your purchase. You have an REO property; what are other similar REO properties doing over time?

You can make this trend analysis by looking at the data using a median sales price by calendar quarter along with sales volume and days on market. You can also determine price per square foot of livable area and analyze that over time.

This will give a fair comparison of like or similar properties over time. The more data points, the more significant your analysis will be.

Now you chart that data. It paints the picture. Try it. It is a lot of work but that is what we appraisers should be doing.

 

[toddmallard]

What are the seller concessions, special financing "if any", type of sale, Was it arms length. Lets get the rest of the data please. Its right there, Just learn how or who to call to confirm.

 

[taurus6]

Randolph,

Thank you for keeping an open mind. It appears that no one else in this forum is. The home listed for $299k is several hundred sq. feet smaller, 2 car garage where mine is 3 car. The other home is in the lower price section of the subdivision. My home is in a higher priced area on a premium lot as well. Do you think I have a reasonable case based on this data?


Chris, even in your own statement, "most" of Volusia is in decline. That means that "some" is not. And to say the presence of a REO property in a neighborhood means declining, is ridiculous. There were REO homes in neighborhoods a few years ago at the peak of pricing. That has NOTHING to do with backing up a declining market or you would have call the market declining back then. And no one did.

 

[Boonders]

Taurus, I would be willing to bet alot of money that all this isn't going to get you anywhere. Your best bet is to find another bank, get another appraisal, and cross your fingers that they accidently check Stable instead of declining.

good luck.

 

[TJSum]

Taurus, very few of us on the forum are familiar with your market, so we can only speak in general terms. If you got a copy of the appraisal report, did the appraiser support their declining market opinion, usually there are supporting comments. If you do not think it was supported, have a good local appraiser "review" it for you, and they will be able to steer you in the right direction. Who knows, they could save you from making a bad investment. A few hundred extra dollars spent on a second opinion might be some of the best money you ever spent.

 

[Randolph Kinney]

Randolph,

Thank you for keeping an open mind. It appears that no one else in this forum is. The home listed for $299k is several hundred sq. feet smaller, 2 car garage where mine is 3 car. The other home is in the lower price section of the subdivision. My home is in a higher priced area on a premium lot as well. Do you think I have a reasonable case based on this data?

Tracy,

I really can't say based upon the one home you are describing that I have not seen or reviewed the listing information and county record, much less the fact that I have not seen the home you are purchasing, reviewed the purchase contract, verified the county and MLS data, etc.

I am in Carlsbad, California in San Diego county and I am not geographically competent to render an opinion on anything in Florida.

What I am trying to help you with is the appraisal process; how do we appraisers do what we do. We typically work on the principle of substitution; would you buy the house that is listed for sale at $299,000 for that price as a substitute for the one you are tyring to purchase? If not, why not?

Show us the homes that you would consider purchasing that you consider a substitute for the one you are offering to purchase. Describe what you get for the price.

Hopefully, after looking at the market and neighborhood very closely on what you consider a substitute for the home you are purchasing, it will give you enough confidence to either put up the additional money down payment or go with a different lender and another appraisal gambling what your opinion is will be in agreement with the new appraisal.

 

[Chris Colston]

Randolph,

Chris, even in your own statement, "most" of Volusia is in decline. That means that "some" is not. And to say the presence of a REO property in a neighborhood means declining, is ridiculous. There were REO homes in neighborhoods a few years ago at the peak of pricing. That has NOTHING to do with backing up a declining market or you would have call the market declining back then. And no one did.

I said...

the fact that most if not all of Volusia County is considered to be in decline.

Sorry, hon (in my most effective Baltimore accent), "THAT dog don't hunt". Of the people who have answered your question and posted to this thread, so far, I am the most familiar with the Debary market. I have been appraising for over 20 years between the DELMARVA area and now Florida. I have seen markets go up and I have seen markets go down. Right now, the central part of Florida is DOWN, way down and there is really no end in sight. Even my own house, my mother's house in Volusia County and my brother's house in Volusia County. I have lost over $50,000 in equity over the past 2 years. Or did I....it was perhaps false equity to begin with.

All anyone has to do is compare land prices of similar sized lots in any given area from 2003 to now. Lots that were $12K in 2003 soared to $80K in 2006 are now back down to $8-10K. THAT is declining!! Land prices help drive the rest of the market. At this point in time I would seriously question any appraiser in Volusia County who DID NOT indicate decline on the appraisal report.

You keep telling us how the builder has told you that other reports were not marked declining. Your statement above about how no one marked declining in the past because of REO activity. It is the extent of the REO activity, how many and why. Right now the OVERSUPPLY of inventory is not just because 1 in 30 have decided now is a good time to sell.

I wish you luck, but I don't think you are going to get the report changed or any other competent appraiser to say the market where you are buying is STABLE.

 

[JT1599]

Wow, you guys are pretty defensive. I'm not looking to change anyone's ethics. I'm just asking how you would present data and what data you would use to justify a stable market segment.

These are real numbers from the county tax appraiser's website. Could this substantiate a stable market in this specific subdivision? All homes are in this subdivision.

Summary:

Sold
7/04 $226k 10/07 $320k
11/05 $384K 03/07 $400k
12/05 $469k 02/07 $470k
11/05 $347k Current appraisal, this is the home I’m buying $355k

For Sale
Sold 4/04 $294k Active listing $299k

TAURUS DONT YOU THINK PERSONALLY THAT THIS IS NOT A DECLINING MARKET WITH THE DATA YOU ARE SUPPLING, THE HIGH PRICE INCREMENTS ARE IN 2004 AND NOW IS 2008

 

[444nutman]

I have done some work in Debary. I want to tell you the last report I got on declining values from countrywide out of the 7 counties I work volusia was the only one that was rated a 5. A 5 being the worst for declining values. https://www.cwbc.com/ContentManaged/files/SoftMarkets.pdf
I have provided you with the link. Debary is not a big town. Here is a reference to realtytrac which lists all the foreclosures and what not.
http://www.realtytrac.com/MapSearch/MapSearch/MapSearch.aspx?zipOnly=true&zipcode=32713&accnt=15550&.
There are currently 351 active listings in a town as of 2004 had 16,000 people.
I pulled up two statistical reports on the local MLS. When I do this for a client I take much more time than I am taking for you but you get what you pay for and since this is a freebie, I am not going to spend more than a couple minutes. This is for all of Debary.
2006-2007: 381 sales in debary AVG sale price 270k. AVG Days on Market 109
2007-2008 255 sales avg sales price 243k Avg days on market 147.
The last year(02/2007 to 02/2008) there have been 267 expired listings. Those are listings which do not sell in 180 days and are pulled off the market. 207 went 180 days or longer, which means they could not sell with enough market exposure.They did not sell because the price was too high. I could go all day but I think the problem you have is you want a box to be checked that an honest appraiser would not check. Appraisers do not dictate the market we just analyze the market. I tried to make it simple and like I said I do much more for a report and take more into account. I hate to be a bearer of bad news but Debary is in decline, over supply and extended marketing time. The other thing is I have no vested interest in your property. The people telling you that there is not a decline are the builder and mortgage broker. The builder wants to sell his house and the mortgage broker wants to make his commission. The person who makes the least of the three (the appraiser) is always the one made out to be wrong by the two who stand to make the most money. BTW I have always liked Debary,nice quiet town and you are near the ST. Johns.