Recent Market Notes:
- Jobless Claims fell to the lowest level since February 2008
- Building Permits climbed to the highest level since October 2008
- The NAHB Housing Market Confidence index was at the highest level since June 2007
- The Treasury will auction $99 billion in 2-yr, 5-yr, and 7-yr securities next week
- Core CPI inflation was 2.2% higher than one year ago
- Retail Sales posted the largest monthly increase since September 2011
- Weekly Jobless Claims matched the lowest level in four years
- The Dow stock index climbed to the highest level since December 2007
There has been a lot of good news in the market over the course of the last several months. Definitely an increase in the real estate market activity locally. So, many are feeling we’re starting a turn around… They feel prices have hit bottom and back on their way back up although slowly.
I’ll share a very recent story… a true story; although, I’ll not share names and addresses. I listed a home recently for a previous client… Great neighborhood, well maintained and cared for home with lots of amenities added since their purchase four years ago. Not the highest priced home on the block but not the lowest either. While we put the home on the market higher than my recommended price based on my market analysis… not so high that it impacted our traffic…
Short story even shorter… four weeks and we have an offer… low as are all offers today, but not unreasonably low… as a matter of fact it was right where I had predicted the home would sell. Even so, we negotiated it back up to an offer acceptable by my client. Everybody is happy! I am looking like a great agent!
Just got to take care of all those “little details” that happen “after the sale” that make the sale a reality… inspections, title search, title policy issuance, termite inspection and contract transfer, get this thing through the ever changing rues of under writing, mortgage pay-off ordered, closing set with closing attorney’s office, etc.
The purchaser, as is the case for most purchasers, will have a mortgage… That is somebody is going to lend him the money to buy this home. So they (the lender) want to have the home appraised as to current market value based on the historic although recent sales data for similar properties. You know, just in case they have to take the home back and resell it… and also because they will probably re-sell the loan way before the first purchase anniversary arrives. And the secondary market that they are selling to requires certain documentation to be sold to the largest number of bidders… and thus with the smallest discount.
We are in a new world … a world that changed several years ago, that closely watches how appraised values are determined and who can influence those valuations. A world that changed due to past abuses and sometimes even outright fraud. Changes that we needed and yet changes that are very painful.
The hour of truth has been reached… The appraiser comes back with his independent assessment of value based on sales within the past 90 days and preferably for properties within a one-mile radius… It’s $20,000 less than the agreed upon price!
Understandably my client is not happy… as for that matter neither is the purchaser.
My client doesn’t understand why the fact that he has a ready, willing and able buyer that this doesn’t establish the market value! Truth of the matter: one buyer does not a market make, at least not in the world we operate today.
We of course did protest the appraisal and provided additional comps that were rejected due to their distance from the subject property.
So here we are with this $20,000 gap that appears to be a chasm as deep and wide as the Grand Canyon. Either the seller reduces the price or the purchaser makes up the difference before counting a penny toward his down payment. The seller’s equity is non-existent… the $20,000 would have to come totally out of pocket… This is not a short sale… not even remotely a potential short sale at this point in time.
We will continue working to try and find a comp that will save the deal. True we could negotiate some more … and maybe we will… but this sale is not now a sale. No amount of wanting it to be different will by itself make it different.
So the question is: Should the appraisal rules be different? As painful as it is to say this: I don’t know … Probably not! But, if they remain as they are, we are a long way from prices rising or the market recovering. As a matter of fact, I don’t know how prices can ever increase with this current set of rules.
May the market be with you.
