With Market In Flux, Lender’s Appraiser Will Have Best Idea What Houses Are Worth

With housing inventory rising, Florida mortgage rates inching higher and price reductions in local real estate listings become routine, it’s becoming harder and harder to say what a home is really worth. In the Florida real estate market, as well as in California, New England and other areas observing sagging sales, this problem is becoming common. The answer may lie with a person rarely seen in the home-buying process — the lender’s hired appraiser.

Kenneth Harney of the online Realty Times discusses the increasingly important role of this individual. An appraisal can be a deal-breaker on both ends of the spectrum. With the national market finally showing some signs of cooling, many sellers are being presented with the bad news that their home is worth A LOT less than it was as recently a few months ago. For buyers, an appraisal lower than the contract price could spell disaster as the bank will then demand a larger down payment.

How do appraisers see things shaping up in the months to come? The following pieces of advice for buyers and sellers may help…

First and foremost, know your market. It sounds obvious, but it’s more and more difficult. Specifically, the goal is to stay on top of your “market sub-market.” Having an idea of what a property is going for in your local niche is imperative. For example, a market slowdown is well underway in middle- and upper-price tiers of the state’s west coast, but not in the entry-level bracket of $250,000 and below.

“It is very important for me to have a lot of input from [agents] I know who specialize. [Agents] really have a very good grasp of where things are heading,” says Frank Gregoire of the Florida Real Estate Appraisal Board.

He notes that because they are on the front lines, the realty agents are the grass-roots experts in specific areas. Talking to them frequently as well as studying industry data is the best way to fully understand the process. Figures can be inflated by exceptional circumstances, such as a messy divorce or an unusual situation in which both sides wanted to get the deal done fast. This information is what the local experts will know, and will be factored into the appraisal process, lending perspective to the “comps” (or comparable sales) in a particular area.

Gregoire suggests that if you are in doubt about pricing, hire a long established, licensed Florida real estate appraiser for an hourly fee. The benefits are well worth the cost.

Another interesting point comes courtesy of Tom Berge, head of an appraisal company in Orange County, Calif., who says that there is just about “zero inflation” in many sections of the residential real estate market. Much as sellers don’t want to hear it, when the most recent comparable sales prices are lower than earlier-sold comps selected for the appraisal, that’s always a telling sign. Prices are headed south.

Chris Call of AREAS Appraisers, Inc., a Virginia firm, echoes this sentiment and urges sellers to be realistic. With markets softening to a large degree, you don’t want to get greedy and then go months without drawing an offer. Prices really do shift quickly, and what your neighbor got for his house six months ago may be irrelevant now. From the buyer’s perspective, understand the extent of your leverage, but don’t expect the seller to bend over backwards for you.

While the days of 20 percent annual appreciation may be over, if both sides can temper their expectations, and Florida home loan rates remain under 7 percent this year, it should be another healthy year for the market overall. Happy hunting!