The Battle Between Appraisers and Everyone Else

             

Appraisers serve a valuable purpose within the real estate transaction. They protect the lenders from lending too much money and they protect buyers from paying too much for a home.

Allegedly…

Look, here’s the thing- an appraisal is one person’s opinion. Get three appraisals and get three different values. An appraisal is supposed to tell you the most probable price (thank you Brian Davis) a home will bring in the open market- it’s market value.

Of course, there are different kinds of appraisals that bring different values, for instance an appraisal for insurance purposes looks at what the cost to rebuild would be so it might come in lower, and a re-finance appraisal typically comes in higher because the bank wants to loan you money, depending on your credit score. But for purposes of this post I am speaking about a market value (or comparable sales) appraisal, which is the type of appraisal you get when buying and selling a home.

The only true way to determine true value is by what a seller is willing to sell for and a buyer is willing to pay. Supply and demand, it’s economics 101.

So here’s my question- if I list a property for $335,000 and we receive 3 offers within the first weekend, all of which are for above full asking price, isn’t it reasonable to assume that the home’s most probable price is at least $335,000? Not according to an appraiser.

Appraisers see the value through a narrow field of view, only taking into account specific criteria. They will not give value toward many things that increase the saleability, or desireability, of a home. Things like an open floor plan or vaulted ceilings, or even top-of-the-line, brand new, Low E, vinyl windows have very little impact on an appraisers value. And having the yard professionally landscaped or having double sinks in the master bath bring almost nothing on an appraisal. These things increase how desirable a home is, so you might think, based on the theory of supply and demand, that they would increase a property’s appraised value, but they don’t.

Having a flat value given toward a bathroom or bedroom is ridiculous- Is there really no difference between the 12×18 bedroom with large windows looking out at wonderful views of mature trees in the park and an 8×10 bedroom with a small window with very little natural light, looking straight at the neighbor’s wall? Not in an appraisal.

Another factor that plays a large part in the struggle we see with appraisers is the fact that, in general, they are ridiculously intolerant of appreciation rates. So an area can be in a hot market, with prices going up and you’d think if the neighbor with the same floor plan just sold for $300,000 you should be able to sell your home two months later with the manicured landscaping for $10,000 more. And you’d be right- you could sell it for $310,000, but that doesn’t mean it will appraise.

Read my previous post about this, and how appraisers are the reason the Salt Lake market was so undervalued for years.

So, because of the warped sense of value appraisers use, and their drudgingly slow response to appreciation, many deals are delayed, or altogether die because of the appraisal. Families are put out, children pulled out of the schools their parents put them in, thinking they would be moving to that area, hearts are broken and dreams shattered by the big bad Appraiser Demons… okay, maybe I’m being a bit dramatic, but you get the point.

When an offer has been accepted by buyer and seller, inspections have been done, and everyone is excited and making their future plans and then the deal falls apart because the appraiser doesn’t see the value like everyone else does- it disrupts lives.

In the Salt Lake market, a market that has been hot for over a year now, we are still fighting appraisers constantly. The appraisers don’t want to admit that homes are appreciating. About 30% of the homes we sell have appraisal issues we have to deal with. We don’t under-price homes to get a quick sale. We allow our sellers to price their home based on it’s actual (not appraised) value. We have no problem finding buyers wanting to buy the property, and then we fight and claw with the appraiser trying to get the deal done.

              

So I explain to our sellers we are actually selling the home twice- once to a buyer, which is sometimes the easier sale, and then the hard sale comes trying to sell to the appraiser. And don’t count on moving into or out of the home until after the appraisal has been done, because a sale can easily fail depending on the comps an appraiser chooses to use.

As I said, appraisals are an important part of the real estate transaction. And with the addition of common sense, they could be even more than important- they could be relevant.

Advertisements

Real Estate Blog-a-thon Today

                               

Oh, those crazy kids… Sellsius Blog put up 50 posts in a day, which inspired Greg Swann at Bloodhound Blog and Ardell DellaLoggiato challenge each other to a blog-a-thon to see who could post 101 posts in a day.

And that day was today- check out the play by play at Property Monger.

Greg took the race from the beginning, not just with the amount of posts, but also in content. He actually maintained a high level of information and interesting topics, which is really amazing. It’s tough enough to be interesting with one or two posts/day.

So the real question is… what will they talk about tomorrow?

Sellsius Breaks the Seal

I knew it would happen eventually.

It had to.

The pressure of writing an interesting blog and presenting new and unique ideas day after day after grueling, griding day. It gets to you and wears you down. And now the real estate blogging community has it’s first casualty.

Joseph and Rudolph over at Sellsius Blog have finally gone completely mad. Crazy. Nuts. Wacko- they’ve left the building all together- they’ve cracked.

                          

They’re now posting 50 posts/day.

I’m not sure if I should applaud this or send condolences to the happy farm they are most certainly new residences of (I wonder if they represented themselves when they found their new place at 666 Blogaholic Drive).

I think a blog-a-thon might be in order…

Dual/Limited Agency Can be Good

       

I know, I know… we’re supposed to all say how we don’t like limited (or dual) agency because it makes us seem more respectable or feel better about ourselves or something. But this is one travesty that I have to defend because I care more about the truth and reality than I do about political correctness.

I’m up for a good debate right about now.

See, lost in the noise of endless proclamation about how dual, or limited, agency is bad and the laundry list of examples where it can be misused is a simple, yet glaring ommission in fact. When used properly, it is not only good for both buyers and sellers in a real estate transaction, but can actually be better for both. Think about it- one of the greatest challenges to a real estate transaction is communication. Honest and timely communication between parties. Having one agent representing both sides can eliminate much of that challenge.

             

People take time off, go through bad mobile phone reception areas, attend meetings, eat dinner, do myriad other things that make them unavailable to get ahold of. Coordinating disclosures, appraisals, inspections, title reports, settlement and reams of addenda can be the logistical equivalent of running in circles until you fall down. And trying to do these things with another agent who doesn’t understand the “Time is of Essence” clause of the purchase contract or is just lazy, careless, or simply tough to get in contact with can make the entire transaction frustrating and sometimes impossible.

 

So what are the limitations to limited/dual agency? The single agent representing both sides can’t disclose anything about either parties personal finances or motivation to the other party. That’s about the whole disadvantage. As if the buyers or sellers agents would “discover” all sorts of things they could tell their clients otherwise.

In reality we, as agents relay information from the other side to our clients, advise them, and then do as instructed. We don’t make decisions for the client. We enable them to make informed decisions and I do not believe that my ability to do so is damaged because I am getting my information first-hand rather than second-hand from the other side.

As with all aspects of agency, if this responsibility is not handled correctly or is misused there will be conflicts and problems. But that is not remedied by eliminating dual or limited agency- it is cured by eliminating the licenses of those individuals who conduct their business that way.

Zillow Opens Up

                zillow1.gif

Zillow announced today (I’m writing this late) that it will now allow homeowners to update the information about their homes and save the new estimate either privately or publicly. You can add remodeling, edit the basic home info, and add value for other remodeling you have done.

First you’ll need to confirm that you are the owner, either by credit card verification or by mailing in the proof to Zillow. It doesn’t take long and it’s a very easy process.

You can’t be a pimp without…

                    

Real Estate 2.0 has a great post about Trulia being a pimp, which is true, but they certainly aren’t the only pimp walking the real estate streets.

And, I’ll tell you what- a pimp is not a pimp unless they have “employees”, people who are willing to pay them even though they are the ones doing all the… (ahem)… work.

Sites like HouseValues and RealEstate.com and AgentConnect take Realtor-driven (MLS) info and then sell leads back to the agents. And the agents buy it all up as fast as they can. It’s stupid because they’re cannabilizing their own industry. Instead of paying $1000/month to HouseValues why not spend that money building your own site and getting your own leads?

        

HouseValues figured out a long time ago that agents in general are slow adopters to technology, so they took advantage of it. I remember when the MLS went online and the agents were freaking out because they thought it would be the end of the industry and the information would be stolen and the technology would break down and no one would be able to access it.

When fax machines came out many agents actually petitioned against them for the same reasons. And with the advent of lead-generation sites, the real estate industry has not protected itself and its interests by shunning them and beating them at their own game, but rather by paying into them and creating a zero-sum gain for the industry.

Follow me on this- here’s how it looks now:

Brokers/agents take listings

Lead-gen sites use listing data to get leads

Lead-gen site sell leads to brokers/agents

Lead/gen site makes lots of money to buy more ads

Lead/gen sites get more leads

Brokers/agents become dependant on lead-gen sites for leads

Lead-gen sites charge more for leads

              

It could look like this:

Brokers/agents get listings

Lead-gen sites go out of business because nobody pays them

Brokers/agents get all their own leads

Brokers/agents make more money

       

And I agree with RE 2.0 that Trulia looks good while they are free, but once brokers/agents are dependant and need them because they have grown big and maybe even relevant… will they still be free? I mean, is Trulia a non-profit that just really wants to help agents?

Trulia says,

“Coming Soon! Offer optional enhanced/branded listing features and performance-based text advertising to create additional exposure for your listing information with home buyers and sellers”

So once their website becomes cluttered with listing ads, the way Realtor.com has, will the next step be to limit vital information about listings unless the listing agents pay, the way Realtor.com does?

Remains to be seen. What is certain is that so far the score is lopsided in favor of lead-generation sites. And that includes Realtor.com… but that’s for another post.