Will Appraisals Continue to be a Challenge in 2016?

Our friends at Keeping Current Matters have provided us with some research indicating low appraisals could continue to be a problem in 2016. Here’s what they say:

Will Appraisals Continue to be a Challenge in 2016? | Keeping Current Matters

“First American Title issues a quarterly report, the Real Estate Sentiment Index (RESI), which “measures title agent sentiment on a variety of key market metrics and industry issues”. Their 2015 4th Quarter Edition revealed some interesting information regarding possible challenges with appraisal values as we head into 2016.

“The fourth quarter RESI found that title agents continue to believe that property valuation issues will be the most likely cause of title order cancellation over the coming year.”

This shouldn’t come as a surprise. In a housing market where supply is very low and demand is very high, home values increase rapidly. One major challenge in such a market is the bank appraisal. If prices are jumping, it is difficult for appraisers to find adequate, comparable sales (similar houses in the neighborhood that closed recently) to defend the price when performing the appraisal for the bank.

Another monthly report by Quicken Loans measures the disparity between what a homeowner believes their house is worth as compared to an appraiser’s evaluation. Here is a chart showing that difference for each month through 2015.

Will Appraisals Continue to be a Challenge in 2016? | Keeping Current Matters

Bottom Line

Every house on the market has to be sold twice; once to a prospective buyer and then to the bank (through the bank’s appraisal). With escalating prices, the second sale might be even more difficult than the first. That is why we suggest that you use an experienced real estate professional to help set your listing price.”

We concur. Our Northern VA market may not be seeing huge price increases, but there are still pockets where homes are selling with multiple offers and above sales price. In this situation, there are a number of strategies your Realtor may employ to protect you. For example, sometimes you can strike the appraisal and financing contingencies, or look for contracts where the buyer is making a large down payment. This is why who you select to represent you when selling your home is SO important. There are a million ways a sale can fall through. This is is just one. Make sure your Realtor knows how to bulletproof a transaction. Ask your agent LOTS of questions before you hire them!

Call Terry Belt or Kevin Kleifges at (703) 242-3975 for more info about selling your home.

Appraisal Came In Low! Now What?

Northern Virginia housing prices may be rising, but appraised values often lag.

Whether you’re selling a home or buying a home, this can be a problem. It’s not uncommon for a home to sell quickly, sell with multiple competing offers and net a sales price ABOVE list price – only for things to come to a halt because the appraisal comes in low.

Northern VA Real Estate - Low Appraisal

Changes in the Northern Virginia Regional Contract that took effect January 1 could be in your favor though. (You can read about other BIG changes in the contract here.)

One strategy that’s used to battle a low appraisal is to find additional comps the appraiser can use. Oftentimes – that means finding homes that may be under contract, but not yet settled. These homes are likely to have higher sales prices than comps that closed months ago – especially as we head into the hot spring market.

In the past, Realtors were reluctant to release information to appraisers about sales prices until the home had actually settled. But new language in the Northern VA sales contract means this process may become much more common. January 1 changes added a new paragraph called “Disclosure of Sales Price to Appraiser”. The contract now gives authority to brokers to release the sales price of the contract to any appraiser who contacts them to obtain the information.

Although the contract has changed, changes in actual practice often happen slowly because many Realtors are part-time and/or sell very few homes. This means they are not always intimately familiar with the contract and the form changes that happen every six months. This is just another example of why it’s SO important for buyers and sellers to choose Realtors from among the top 10%. The more homes they sell, the better they are at protecting you and avoiding/solving problems such as low appraisals.

(Read more about what happens when your appraisal comes in low.)

Search Northern VA homes for sale on our state-of-the-art website.

How Much Is My Northern Virginia Home Worth?

New Strategy For Buyers To Compete In A Low Inventory Housing Market

The Belt Team’s mission is “Changing Lives For The Better” – if it’s time to change YOURS, contact us at (703) 242-3975.

Yes, Northern Virginia, It’s Still A Seller’s Market

Are you wondering how the real estate market is in Northern Virginia, and whether it’s a Buyer’s Market or Seller’s Market? Well, wonder no more. Inventory is low, low, low. And Buyers all over Northern VA are competing for the same homes.

The areas we get most asked about are Vienna & Oakton, so real estate stats for those areas are below. (Call 703-242-3975 or email us if you need real estate stats for Reston, Fairfax, Herndon, McLean, Falls Church, Arlington or any other area of Northern Virginia).

If you’re in the market to buy or sell NOW, you may want to read these articles:

Last week in Vienna Real Estate (22180,22181, 22182):

Search Homes For Sale in Vienna

  • Number of Contracts: 13 (down from 18 the week before)
  • Average Days on Market for Active Listings: 100 days (down from 103 the week before)
  • Average Days on Market for Listings That Went Under Contract: 52 days (up from 36 the week before)
  • Inventory: 124 homes on the market (up from 115 the week before)
  • Number of Months Supply of Homes (Based on past 90 day contract rate): 2.0 months (up from 1.9 the week before)
  • Number of Months Supply of Homes (Based on past 30 day contract rate): 1.5 (up from 1.35 the week before) months

What Is My Vienna Home Worth?

Last week in Oakton Real Estate (22124):

Search Homes For Sale in Oakton

  • Number of Contracts: 13 (twice as many as the week before)
  • Average Days on Market for Active Listings: 88 days (down from 94 the week before)
  • Average Days on Market for Listings That Went Under Contract: 35 days (down from 125 the week before)
  • Inventory: 57 homes on the market (just 1 more than the week before)
  • Number of Months Supply of Homes (Based on past 90 day contract rate): 1.8 months (down from 2.1 the week before)
  • Number of Months Supply of Homes (Based on past 30 day contract rate): 1.2  months (down from 1.4 the week before)

What Is My Oakton Home Worth?

No matter why you’re moving, we can help you make the BEST move. If you’re thinking of buying or selling a home, Contact The Belt Team at (703) 242-3975. We think you deserve the BEST Realtors in Northern Virginia!

Our mission is “Changing Lives For The Better – One Family At A Time!”

Appraisal Issues In A Rising Housing Market

Low Appraisal Northern VA Real Estate

Inventory is down. Prices are coming back up. And as a result, the “ugly appraisal issue” is rearing its head. Sometimes what you get is a roll of the dice!

Most contracts on homes in Northern Virginia contain an appraisal contingency. In other words, the contract is contingent upon the home appraising for a certain value, often the sales price. However, appraisers hired by lenders are held to very specific standards. For example, they must use 3 settled comparables (meaning 3 homes that have sold and gone to closing). They can add a 4th comp that is under contract and even one that is just listed & not sold yet. However, the value is mainly derived from the settled comps.

So when we are in a rising market, as we have been for about a year in our area, appraised values often lag true market values; and we see appraisals coming in low.

Earlier this month, a home in Vienna received 11 contracts. It has not settled, so we are not sure of the final price, but it’s very likely it sold well over list price. If the winning contract contained an appraisal contingency (and it may not due to the competition involved), the appraiser may have a big challenge supporting the value. In this case, when so many people are bidding up a property, it’s unlikely the sold comps will support it. (This is where we see market value not matching appraised value. And the reverse can happen in a declining market.) It will take time for sales to happen that are cash purchases or for buyers with large down payments. Once these happen, appraised values can start rising again.

Market Value Does Not Equal Appraised Value

So what happens? Does this mean your home sale or purchase is automatically derailed?

The short answer is – it might or it might not. (About 18 months ago, The National Association of Realtors reported that one in five contracts was canceled because of “appraisal issues”.)

In one case we had, the appraisal came in over $100,000 below the agreed upon sales price in the contract. Since the contract was contingent upon a satisfactory appraisal, the purchasers had the option of voiding the contract. The Buyers & Sellers tried to come to an agreement to lower the price, but could not reach an accord. And the contract fell apart. The home went back on the market.

What was interesting to note about this case (and very frustrating to all concerned!) is that the appraiser was not familiar with our area. Not only did he live in another state, but he was so unfamiliar with Vienna (where the property was) that he got lost on the way to the home to do the appraisal and had to spend 20 minutes on the phone with our office directing him to the property. (Note that this home is EASY to find and in a sought after, popular area.)

Lost Appraiser

Unfortunately, this is not an unusual occurrence. While many appraisers are professional, full-time, local experts (just like many Realtors are), some are not. And based on various lending requirements and other regulatory legislation, there is very little control able to be exercised by Realtors, Sellers, Buyers and even Lenders on the selection of which appraiser to use.

Another common occurrence in situations like ours is that when the appraiser is not familiar with the area, and has not been in other similar homes in the neighborhood, he/she often relies strictly on tax records and MLS information. And while that information is important, it is sometime lacking in critical detail. For example, the MLS or tax record may leave out an important “detail” like the fact that the home backs to power lines. This “little detail” has HUGE impact on what Buyers are willing to pay and should be adjusted for when doing a valuation of the home. What we see happen sometimes is that a home is undervalued because an appraiser uses a home like the one backing to power lines as a comp (comparable), but does not adjust the value of the subject property (the one he is trying to set a value for) upward since that home does not back to power lines. How could he if he doesn’t know?

We had another situation where the appraisal came in below sales price. In this case, the buyer was making a significant down payment (more than the minimum required by the lender), so the buyer had the option of voiding the contract, re-negotiating the sales price with the Seller or proceeding to settlement despite the low appraisal. The buyer was a local buyer, one who had already been living in the general vicinity of the home and who knew the value of the neighborhood and the “intangibles” that an appraiser may not recognize or be able to adjust for based on lending guidelines. So the Buyer chose to proceed to settlement at the original sales price, despite the low appraisal.

There are all sorts of different scenarios that may play out when an appraisal comes in low. These were just two examples. One conclusion we have made is that the experience of the Realtors on both sides of a transaction has direct influence on what happens (just as the experience of the appraiser affects the outcome). If you are buying or selling a home – a low appraisal is just one of the possible “challenges” you may face. You need a Realtor who can not only fill out forms & “pull comps” for you, but who can discuss re-sale issues you may not have thought of, who can resolve financing issues you may not be aware of and who has vast resources to draw upon.

In another of our low appraisal situations, we had a Buyer and a Seller who both really wanted the sale to go through – despite the low appraisal. The Seller could not afford to lower the price. And the Buyer did not have additional money for a down payment, but felt the value was there, planned to be in the home for the long-term and really wanted the house, even though it appraised for less than sales price. In this case we were representing the Seller. A nice, hard-working, but less experienced agent was representing the Buyer. This agent was not able to help her Buyer find a way to get financing. Since our team has been working in the local market since 1973, we have a vast array of contacts & resources that we can call upon in difficult situations. We were able to connect the Buyer with one of our top lenders. The lender had a special program requiring less down payment and was also able to obtain a more accurate appraisal. And this sale went through. Happy Buyer and Happy Seller.

Happy Person

Each situation is different. Can the appraisal be disputed by the Realtor providing better comps – comps that fit the lender’s requirements? Can a new lender be brought into the picture? Does the Buyer even want to proceed if the appraisal is low? Can a new sales price be negotiated that both parties agree upon? Would a different loan program work? Can the Buyer make a larger down payment so that the lender will proceed with a low appraisal? Is there a relocation company involved and does this affect a buy-back or reimbursement? Would it be better for the Buyer not to proceed? These and many more questions are the types of things your Realtor should walk you through!

If you’re thinking of buying or selling a home, Contact The Belt Team at (703) 242-3975 for a more in-depth discussion & analysis We’ll be happy to schedule a consultation and get very detailed about the homebuying or homeselling process so that you can make the decision that is best for YOU! Don’t you deserve the best real estate agents in Northern VA?