What do you all think about this article?

[Pamela Crowley (Florida)]

What do you all think about this article?

http://www.ajc.com/homefinder/content/homefinder/stories/2008/01/10/johnadams_0113.html

Wait-and-see attitudes contribute to appraisal volatility

I found out years ago that the most popular of all small talk is about real estate home values. "What's it worth?" must be the most often asked question in the world of real estate. And anyone venturing a guess, based on almost any data, or even none at all, is instantly the center of attention in any discussion.

Unfortunately, there is one problem with all this speculation: one can never know exactly what one's home is worth until it is placed on the market, given a full exposure, and finally, been placed under a negotiated sales contract by typically motivated parties. In other words, you can't know what your home is worth until after you sell it.

But if that is the case, then why are we so preoccupied with guessing, and how do the appraisers come up with their prices for fair market value?

Is it possible that we are today seeing a concentration in the pool of buyers, skewing it toward those who are not typically motivated, but instead are looking for great buys from desperate sellers who must sell at any price? If that is the case, it would explain a lot.

With current levels of foreclosures, there are many sellers who are highly motivated to sell their homes, if for no other reason than to stop the foreclosure.

My point is this: Until we see a healthy level of sales re-established in the metro home market, we may see an unusual level of volatility in reported home values. That makes the appraiser's job particularly difficult, and brings into sharp focus the challenges facing the real estate market today.

 

[Workbox]

I think there are two types of investors; those that know what they are doing and saw the bubble go up, but did nothing or with limits. Then their are those that saw the infomercials and "Flip this House" RE-industry-driven type TV shows that really had no reason to be doing it. To have the vulture investors prey on the newbee investors and for more $$ drop before they go in.

They know that there is a market that wants into those homes, but could not afford it, because of the over inflation. But for those that are regular sellers or homeowners, they will be effected dramatically in many cases and would be stuck, and in many cases very angry.

As for appraising, the appraiser better explain and know what they are doing in these markets.

 

[moretti]

It sounds like the same thing like when the market was going crazy and people wanted to buy so that they would not be outpriced in a few months. I remember some new contruction having a waiting list of thousands all putting down deposits site unseen.

Some home owners held on to their homes becuase they thought they could squeeze out a little more in a few months. They never wanted to look back and see they could have made alot more so quickly.

Now most values are dropping. Houses sell cheap but these sales are creating a market. I can see the trends in my local areas. I think that active listings and pending sales are huge indicators in declining markets as to what is occuring.

 

[Mike Boyd]

Even a MOTIVATED buyer wants to make the best deal possible. It's just like buying a car. There are so many on the market and if you can't get the deal you want, the astute buyer will keep looking. So, that is the market. If the "pickens' are slim" not as much negotiating will occur.

Why are appraisals so important? Because lenders rely on historical data as as the basis for security for the loan. Appraisers are a "disinterested" 3rd party with training and experience in interpreting this historical data. In the current market, we also have to look at what else is available and consider that when interpreting That historical data. Other users of appraisals have the same reasoning except, while they are not making a loan, the experts, appraisers, will provide an objective opinion of value for the division of the property or distribution of the funds derived from liquidation.

You asked what we thought of the artical. I think it is typical thinking for non appraisers, and not uncommon....and it has been that way for at least the 43 years I have been in real estate.

 

[hastalavista]

Even a MOTIVATED buyer wants to make the best deal possible.

Well said!

 

[Elliott]

Pretty unique article, it didn't bash appraisers. I thought
the author was insightful. I'm fond of telling people,
at the end of the day, the value of your property is the
result of 3 or 4 couples who bought and sold homes in the
last six months that were very similar to yours. Hopefully
those people were reasonably well informed.

 

[Beth Stevens]

I agree with what Mike Boyd said!!

 

[Lawrence R.]

Let me be the second person to actually ANSWER your question.

The article dealt with appriasers pretty even handedly, and did pose a good question about what if the typical market isn' typical....

She should have asked her source for the rest of the appraisal info that.

The appaiser could have told her that no matter what the motivations are, if they are the MO of that market, then the buyer and seller BECOME typical. Just because a method changes doesn't mean the market is no longer typical.

I do think sellers have deccided to forebear their plans to move if they can afford to stay.

I do think buyers are hawking for deals.

I do think there is a market, albeit a soft one.

 

[Mike Kennedy]

"With current levels of foreclosures, there are many sellers who are highly motivated to sell their homes, if for no other reason than to stop the foreclosure.

I also believe that many current owners, recognizing there is almost a one-year supply of new homes waiting for buyers, have decided to wait for better times to sell.

My point is this: Until we see a healthy level of sales re-established in the metro home market, we may see an unusual level of volatility in reported home values. That makes the appraiser's job particularly difficult, and brings into sharp focus the challenges facing the real estate market today."

OPINION LACKS the concrete advice to his LOCAL readers that NOW, more than ever, ANY on-line valuation, BPO, CMA, not done by an Ethical, LOCAL, Experienced Certified, or Licensed, Appraiser - WITH VERIFIABLE REFERENCES - is critically flawed as they are based on largely outdated and/or sheerly INACURATE data essentially NO DIFFERENT than Zillow.

Further, his advice regarding ABOVE GRADE GLA, is incorrect. The Market determines consideration of finished lower level and basement area - NOT some pre-ordained NON-BINDING guideline. Having said that ...... the article cites NO support to the advice he POSSIBLY received from area Appraisers.

Basement SF is Basement SF - unless the Market dictates otherwise. Additions and other Improvements MAY have significant contributory value - unless they are Illegal and/or the Market dictates otherwise. COST has no bearing on Market Value - failure to address this CRITICAL issue for his readers does them an injustice.

Considering that this is a HUGE FACTOR in Over-Valuations (in many cases doubling GLA) ......... IT IS ESSENTIAL to secure the services of a LOCAL Appraiser who must SUPPORT treatment of Above and Below Grade finished areas.

Having said that, I too consider ANSI Guidelines, and when doing a Fannie..... Fannie's guidelines. In almost all cases, locally, a Basement IS WHAT IT IS - a Basement. This CAN vary - as do opinions. Caveat Emptor to his readers, none of the OTHER possible "valuation" sources MUST support their estimates. We Do. This is NO TIME ......to obscure the market data and confused Homeowners........ hire an Ethical OBJECTIVE Appraiser, get the facts, and the "SHARP FOCUS" current market conditions REQUIRE.

Simply another Opinion which should have been stated in the article.

 

[Lobo Fan]

I think the market is what it is. If the only buyers are vultures looking for a steal, then that is the market. I have had this discussion with my Dad, a seasoned Realtor with over 80 REO listings in a small town. They are figuring depreciation at 2% per month, more for outlying areas.

He is sitting on a lot of listings with many offers well below an already discounted asking price. If declines in value are all that is foreseeable, the any buyer will try and buy at a price they think they could sell it for in a year or whatever.

I don't think it is our job to try and adjust for market conditions. All we do is report the current market value based upon the best data available. If the only offers someone can get on their property is $200,000 then that is the market value. It doesn't matter if the buyer is a vulture. All that matters is the closing price.

There is going to be some pent up demand. People needing to upsize or downsize that have been waiting for better days. When that pent up demand breaks loose is all conjecture.

I guess if the market is all distress sales and pre-foreclosure or REO sales, then that is the market. Trying to make an adjustment because the buyer is a vulture or the seller is distressed is outside our scope of work. Non arm's length transactions should not be used unless that is the real market.