The House You Are Selling or Buying is UNIQUE, errrrrrrrrrrrrt!

In the recent 4-6 months, I have been in numerous transactions where my clients/buyers were buying a home and appraisal circumstances arose. I use the word circumstances because I don’t want to use a negative term when ultimately it’s not negative and shouldn’t be unexpected. When you are a lender or realtor working w/in a real estate market that is regarded as one of if not the worst foreclosure markets the nation has seen, you have to conform your expectations to what the norm is. Obviously EVERY home sold in the DFW and Collin County is not in a declining, soft, or foreclosure community and I’m not talking to all of you professionals who’s target market isn’t in a foreclosure situation. On the other hand, it might be pretty safe to say that there are more in those markets than in the non-declining, soft, or foreclosure riddled market. “The majority defines the norm.” Think that through and it may change the face of your approach in consulting in these days. “The majority defines the norm”. Mortgage and Real Estate Pro’s, know the facts of your market and create proper expectations for your clients and educate yourself where the other so-called professionals aren’t. This is where we bring value to ourselves and earn our referrals more than ever. If you are a practicing realtor or lender, and in describing your represented home or client’s home you have to use description terms and phrases like, biggest, bigger than the others in the area, newest, most upgraded, least upgraded, smallest, and all the other terms that take a description farthest from anything that is TYPICAL, you are not likely to benefit from an appraisal in this market. On the other hand, if you are educated on this and have been through and accepted the fact that there is a better chance that the less than hopeful price shows up on the appraisal, you’ll be prepared to educate your seller of their risk in not accepting the lesser value and the unfortunate possibility they run directly into the same problem if they choose to pull out of the contract in hopes to get another buyer who’s lender accepts a higher elevated appraisal. Am I saying that the suggested house isn’t worth what they think it is? NO!…and I mean NO. If there are people willing to pay $200,000 for a house, but due to appraisal pressures, the appraisers value comes back at $185,000, you can probably get $200,000 for it, IF IT’S A CASH BUYER, or you are willing to wait for some type of pressure relief on appraisals. I am merely saying that the guidelines, restrictions, and pressure that has been put on appraisers in this market have forced them to a more template driven form of appraising and using common sense and “brain power” is not an option. If you are in this type of transaction, your advice to your client might have two options and sound like this when the appraisal comes back less than the contracted agreed amount; “client, nobody knows when the market will turn or restrictions become less restrictive and if you don’t lower your sale price to the appraised value (that many times is reviewed by a non-biased appraiser)so that the buyers lender will lend on this property, you are most likely going to run into this in the next 30 day escrow you join into, or think about holding out for the turn in the market in hopes of getting the value you think your house is worth, and the value we all know realistically it is worth.” Since the majority/norm of buyers is coming to the table with financing, most sellers are going to eventually succumb to lowering their value or giving up on selling for the time being.
Please realize that there are many communities that are not seeing this at all, and I am not talking to you if that is the case in your market. If you haven’t run into this, your community may be turning and churning just great. My reflection on an appraisal that I recieve today is that it is not reliable for my purposes until an underwriter has seen it, and if that underwriter has demanded an appraisal review, then after the appraisal review comes back. This means that just because a seller had an appraisal done before they put their house on the market, or 2 days before the buyer submitted their offer, that doesn’t mean respected and accredited underwriters certified to underwrite for Fannie, Freddie, VA, or FHA loans will agree. There are new laws and guidelines in respect to the relationship between lender and appraiser so that the appraiser does not feel pressure in “stretching value”, but appraisers will tell you that those guidelines haven’t made their effect yet, and appraisers are still trying to meet referral expectations on value, therefore coming up with values that won’t make it through underwriting.
One of my favorite motivational phrases is, “some have a strength, call it a talent or capacity, for change.” Times have changed. Have you?