DNAinfo New York (09/18/2013) - Gulf Widens Between Real Estate Bids and Appraisals
Gulf Widens Between Real Estate Bids and Appraisals
Apartments where appraisals came in low
MANHATTAN — In today’s fast moving real estate market, many appraisals are not keeping pace with the prices that house hunters are willing to pay.
The value estimates are based on “comps” — sales of comparable homes of similar size within a roughly one-mile radius that closed in the previous 90 days. But New York's current tight inventory means fewer sales which, in turn, makes finding good comps a challenge.
Plus, with some neighborhoods seeing prices rise 5 percent each month, comps can be off by as much as 20 percent, brokers said.
Appraisals that are much lower than contract prices affect how much people can borrow. Banks usually approve loans of up to 80 percent of the assessed value of a home. Therefore, if there is a discrepancy between the loan and the sale price, it could kill a deal or force a buyer into putting more cash down to cover the gap.
Many brokers working for buyers are not only preparing their clients to expect low appraisals, but are also doing extra legwork, such as filing objections with banks or calling other appraisers for opinions to make sure the estimates come as close to the purchase price as possible.
“When you’re out there as a buyer looking, by the time you see five apartments, you know a good deal. It’s not brain surgery,” said Jesse Buckler, of BOND New York.
“But with my buyers now, I tell them to get ready and don’t be shocked. There’s a good chance the appraisal might come in under.”
Here are a some things buyers need to know:
What to do if you have a low appraisal:
In this sellers’ market, many buyers are now waiving mortgage contingencies to win bidding wars. That means getting out of a deal because of a low appraisal that affects one’s loan isn’t so easy. Buyers can lose a downpayment if a mortgage doesn’t come through, or have to cough up extra cash to make the difference.
“A lot of whether you have the right to cancel and have any recourse depends on the contract,” real estate attorney Edan Pinkas said. “You always have to weigh the risk of not getting a loan versus how badly you want the place.”
A 600-square-foot one-bedroom co-op on East 72nd Street that was on the market for roughly three months and attracted four offers, for instance, went into contract for $440,000. But when the appraisal came in at $405,000 the buyer threatened to walk away, said Buckler, who represented the seller.
“The apartment was worth $440,000, but it was one of those of those buildings that hasn’t had a lot of sales,” Buckler said.
The buyer was only seeking 70 percent financing, and the bank was still willing to give the loan, so she couldn’t get out of the contract so easily.
In the end, she recognized the apartment's value and agreed to pay $440,000, Buckler said.
Why market appraisals are low right now:
“You have a market changing so rapidly with bidding wars [and] listings breaking records per foot within the span of a few weeks,” said appraiser Jonathan Miller.
And with tight inventory and fewer sales overall, it’s harder to have data for comps.
“What happens when you don’t have supply, the market becomes much more erratic and inconsistent,” Miller said. “You get more outliers.”
He likened appraisals to perishable products: "In a hot market, the appraisal fades faster."
How federal reform is affecting appraisals:
Further complicating matters are new federal rules requiring third party appraisers — who are generally inexperienced, most experts say — tabulating the prices that banks then use when lending.
The federal rules were implemented after the 2008 housing collapse when banks were working hand-in-hand with appraisers. But now, since banks pay these appraisers low fees, many come from outside the city and don’t know the block-by-block nuances of the market here, many experts said.
“New federal regulations have caused unintended consequences,” Michael Vargas, of Vanderbilt Appraisal Company, said. “More appraisals are being performed by the least experienced appraisers who are willing to work for lower fees.”
Buckler had recently represented a seller for an apartment on West 22nd Street that went into contract for $2.225 million and was appraised for $1.7 million.
“It was a beautiful condo in Chelsea,” he said. “I talked to the appraiser. He had never even been to Chelsea before.”
What brokers are doing to help:
“We make sure appraisals are done early so we can fix it if we can,” said Brian Meier, ofDouglas Elliman, who estimated that roughly 20 percent of appraisals are coming in below the purchase price.
A two-bedroom on Bond Street a client of his bought recently, which went into contract for $3.2 million, was appraised for $2.8 million. Meier’s team contested the figure, bringing the bank three other comps in contract and other comps that had closed but were not on the appraisal report.
The appraisal was raised $320,000, and Meier got the seller to foot the bill for the extra $80,000 that the buyer had to put down.
Besides bringing comps, Meier lines up back-up banks for buyers.
“A property is worth what a buyer is going to pay, not what the appraisal is,” he said. “You have to walk [buyers] through it and hold their hands and explain that sometimes the math is not correct.”
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Real Estate Business (07/24/2012) - DIY Home Sale Advocate Cant Do It Himself
DIY home sale advocate can’t do it himself
3657 people have read this article
|Tuesday, 24 July 2012|
The founder of a website that urges home owners to sell their property without an agent has been forced to give up trying to sell his own home and call in a professional.
Former CEO of ForSalebyOwner.com, Colby Sambrotto, listed his New York condominium through online classified ads and FSBO sites last year. Six months on, however, he opted to hire New York agent Jesse Buckler.
Mr Buckler immediately advised a price change as the listing was not attracting the right buyer.
After giving up on the DIY route, Sambrotto’s decision to hire an agent led to the property attracting multiple offers, closing for $150,000 over the original asking price.
Mr Buckler stressed to Real Estate Business the value that agents can add.
“Agents can negotiate a better price,” he said. “I know what the competition is in the marketplace. I know what the buyer has seen. I have the skills to overcome their resistance. I am not emotionally attached.
“Negotiation is a very direct art and, at times, very indirect – not everyone has it in them.
“It is subtle and powerful and for me, it is not emotional, which is a nearly impossible aspect for homeowners to leave out of the equation, unless they have an agent to get them past that and keep them focused on the goal of selling.”
Mr Buckler said he does not care which home his client buys; he is only concerned with getting the best possible price.
“I always make it clear to my buyers that if this is the home you want, X amount of dollars is what it is going to take to get it. Yes, you may be able to get it for a slightly lower price, but do you want to risk losing it?
“This is where an owner has no footing, no standing with a buyer who walks in off the street. Developing a rapport of this calibre with a buyer is something good agents do rather quickly. What is on a seller’s mind at the first meeting is, ‘I paid X amount for that marble countertop so I am not giving my house away’.”
Mr Buckler also claims that paperwork and legal hurdles can make it too difficult for an owner to sell their home.
“An owner … without [legal] representation is undertaking what can be a long, difficult, and perplexing process. To learn as you go is risky business when you are dealing with the roof over your head.”
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