New construction resell - improvements don't add value?

[Michigan CG]

Weird -- my last post didn't post......

You are in a "moderated" section of the forum and all posts have to be approved.

 

[Bob Ipock]

Is the housing market today the same as it was five years ago?


http://stlouisrealestatenews.com/tag/st-louis-home-prices/

 

[kgfstl]

There's no explanation as to the rationale of the adjustments. I thought perhaps they were standard, like from a book (this is how naive to the process I am and why I'm asking here!).

Because certain lenders use crappy appraisers through AMCs (Appraisal Management Companies).

Hopefully the appraiser who valued your home explained the rationale of his/her adjustments throughout the report. I have a hard time with some appraisers' basement adjustments.

 

[AnonApprsr]

Ha, I thought it was just my posts that needed approval. You don't have to post this one, but it's easier than PMing you Mich.

 

[Michigan CG]

Ha, I thought it was just my posts that needed approval............

Yours especially! :new_smile-l:

 

[AnonApprsr]

Adjustments are based on how the market perceives certain items and features of your home. How much did you pay for all of these improvements? How much will others pay to have these improvements in a home they are purchasing, as opposed to the same exact home without them? Remember, there may be buyers who hate quartz and consider that a downside!

I wouldn't pay extra money for a lot of things that are expensive.

 

[kgfstl]

I'm not arguing that it's the same market as when we purchased the home. I'm seeking information about the circumstances under which improvements result in an increase in home value.

We're still doing fine in the sale -- 25% more than we paid for it.

Is the housing market today the same as it was five years ago?


http://stlouisrealestatenews.com/tag/st-louis-home-prices/

 

[kgfstl]

Adjustments are based on how the market perceives certain items and features of your home. How much did you pay for all of these improvements? How much will others pay to have these improvements in a home they are purchasing, as opposed to the same exact home without them?

That's partly my point. There have been no cases in my neighborhood where homes that have been similarly improved have been offered for sale. There has been no market reaction. The market has had no previous opportunity to react. Actually, the reaction thus far has been to offer to buy the house 2 days after listing and to offer a price $17,500 over the appraisal.

How does this do anything but enforce stasis?

 

[residentialguy]

Because certain lenders use crappy appraisers through AMCs (Appraisal Management Companies).

Hopefully the appraiser who valued your home explained the rationale of his/her adjustments throughout the report. I have a hard time with some appraisers' basement adjustments.

I know when it looks like the appraised value will be less than the purchase price, I spend extra time making sure my report is as bullrtproof as possible.
If you have additional comparables you want considered, than provide them to your buyer assuming they still want to proceed.

KEY POINTS, imo.
If the buyer/seller fit the descriptions in the definition of MV (see below) and the appraised market value came in low from a AMC appraiser, I have a sneaky suspicion that the appraiser was a "get er done fast and with least amount of work as possible" (aka skippie). I would have had another appraiser do an appraisal...or even have your agent pull comps to see if the comps the appraiser used were the best and the adjustments were accurate. But since you settled on a lower price, that's water under the bridge.

The problem doesn't end with your sale, however. It is a gift that keeps on giving, or should I say "taking". If your house has sold below market value (thank you, skippie), it will be used as a comp by other appraisers...possibily affecting the market value of future sales, as well.


DEFINITION OF MARKET VALUE: Market value is the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and each acting in what he considers his own best interest; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

 

[residentialguy]

That's partly my point. There have been no cases in my neighborhood where homes that have been similarly improved have been offered for sale. There has been no market reaction. The market has had no previous opportunity to react. Actually, the reaction thus far has been to offer to buy the house 2 days after listing and to offer a price $17,500 over the appraisal.

How does this do anything but enforce stasis?

Exactly. Lack of evidence does not support that there is no market reaction to the improvements. And the fact that your buyers, who are part of the market, would prove otherwise to the appraiser arguing from silence that the improvements have no market reaction.

Like Lobo Fan said, "I know when it looks like the appraised value will be less than the purchase price, I spend extra time making sure my report is as bulletproof as possible."

I better be 100% dang sure and have loads of evidence supporting my position if my estimated market value is not what that buyer and seller of the market had agreed upon.