Appraisers Face Challenges in Cooling Florida Housing Market

Once you decide on the best Florida home mortgage, and then track down the house of your dreams, it’s always a good idea to have that piece of property appraised.

In a cooling real estate market, however, this can be a challenge. After all, how do you value a specific residence when local home sales are down 20 percent to 40 percent from last year, inventories of unsold homes have ballooned by 200 percent or more, and all the trend lines are pointing negative?

Difficulty facing appraisers

It can be tough. Traditionally, real estate appraisers focused heavily on sales of similar properties - ‘comparables‘ that closed in recent months - to make their valuations. But that doesn’t work well in markets that had been superheated are now stalled out or falling.

It also doesn’t work well in markets where recent closed sales prices often were inflated by incentives provided by sellers to buyers - contributions to closing costs, for example, ‘buydowns’ of Florida mortgage interest rates and other sweeteners not always on the public record.

“It’s getting pretty dicey out there,” said John Bredemeyer, a residential appraiser and spokesman for the Chicago-based Appraisal Institute, the largest professional group for the industry. “Just looking at historical data can be perilous. You’ve got to open up the window and see what’s really happening now. You’ve got to answer the question: `Where are we in this cycle?’ And you’ve got to factor that into your valuation.”

Some Florida mortgage loan lenders and relocation companies now expect appraisers to examine a wide range of data they never emphasized during the boom years. Gary Crabtree, owner of Affiliated Appraisers, based in Bakersfield, Calif., says that besides the traditional “recent comps,” he now factors in at least eight other types of data in reaching the current valuation of a house:

* Pending sales under contract.
* Current listing prices of houses in the area.
* Local Florida housing market market supply and demand.
* Length of time unsold on the market for current listings.
* Price reductions or increases on current listings.
* Notices of defaults and notices of trustee’s sales.
* Known concessions provided to buyers to facilitate sales.
* Personal interviews with realty agents on what they’re experiencing with sellers and buyers.

Even some of these factors can be tricky, though.

For example, Crabtree said, some realty agents increasingly are playing what he calls “the re-list game.” Because multiple listing service data reveals how long each property has been on the market, agents with unsold houses now sometimes cancel the listing - take the property off the market for a short period of time - and then list it again with a different price and MLS code.

“Now the house no longer looks like it’s been sitting dead in the water for months on end,” said Crabtree. ‘”It looks like a new listing,” and it’s reported in that misleading way in the data that appraisers use to gauge the overall market.

It’s important that an appraisal does, in fact, match the purchase price for your new house. Therfore, carefully consider the professional with whom you’re aligned and realize the challenges he or she faces.