Posts Tagged 'appraisals'

Setting the Value of a Property

A Distressed Property that Looks Great

This last week has been a busy one in Real Estate.  I am asked many questions about the process of buying or selling short sales and bank owned properties (REOs).   I just listed a great home in Santa Rosa that is not a “distressed” property.   The question came up as to what is the pricing difference between “distressed” properties and those that are not.  I always respond that the prices are about the same for the same condition.  But often distressed homes are not in as good a condition as those regular sales.  Below is an article on appraisals that was sent to me by Ron Shaw of Paramont Equity.  I think that it gives a good description of the values given to different sales conditions.  Hope you enjoy it.

The Appraisal Institute recently released guidelines to instruct its members on how to deal with distressed sales and foreclosures when seeking comparables.
According to the Institute, some homeowners claim appraisers have undervalued their homes by relying on nearby foreclosed homes and distressed sales as comparables to their properties.
In a recent announcement about the new guidance, the Appraisal Institute states that qualified appraisers “know what adjustments to make, if any, when using distressed sales as comparables, for such methods are taught in basic coursework and updated seminar materials available to professional appraisers.”
Regardless, because the issue is “particularly crucial” in the current market where distressed sales are common, the Institute is offering additional guidance.
The new guide instructs appraisers to rely on less recent sales and broaden their geographic parameters when they cannot find an appropriate comparable within the traditional boundaries.
In general, “foreclosures and short sales usually do not meet the conditions outlined in the definition of market value,” the Institute says.
Short sales may involve “atypical seller motivations,” and foreclosed properties may be damaged or deteriorating. However, “appraisers cannot categorically discount foreclosures and short sales as potential comps in the sales comparison approach,” the institute states.
“As is always the case in selecting sales to use as comparables, appraisers must investigate the circumstances of each transaction, including whether atypical motivations were involved, sales concessions were involved, the property was exposed on the market for a typical amount of time, the marketing program was typical, or the property condition was compromised,” the guidelines state.
When using distressed sales as comps, appraisers must assess all aspects of the sale and decide whether it is appropriate to make an adjustment due to uncommon conditions.
 

So when you are deciding what to offer on the property, the condition is what is paramount – not the type of sale.

 

What is Happening in Sonoma County Real Estate?

Amazingly I realize that it has been almost two months since I have posted.  It is not that I have not thought about it – it all has to do with timing.

December was filled with getting myself situated at RE/MAX PROs in Rohnert Park.  Yes, it is the same office as CPS Property Advocates which I joined in November.  Four affiliations in the span of six weeks is quite an undertaking.   Fortunately during this time, I have been able to get some business transacted.

Last week the little cabin in Maribel Heights of Forestville closed.  Two days prior to the close, the short sale on Gamay Street in Santa Rosa was approved and inspections were completed.  Early last week, we opened escrow on a bank owned condominium on Racquet Club Circle in Rohnert Park.  I would say that business is picking up in Sonoma County.

But none of these escrows are straight forward or “easy.”  What is a “straight forward” escrow?  Straight forward is where the seller agrees to an offer, the inspections are completed to everyone’s satisfaction, the appraisal is submitted and accepted by the bank, the escrow company draws up the papers, the buyers and sellers sign the documents, the bank funds the loan and the sale closes.  There are many steps but everything goes in a smooth order.  This does not seem to happen often these days.

8190 Knoll Drive, Forestville

The sale in Forestville was the perfect opportunity for a regular, straight forward transaction.  It is a cute, clean cabin – built in the 50’s (maybe – who knows when the county did not keep records at the time) and with a second lot next door.  First problem was that many did not believe that the lot was buildable (i.e. that the county would allow a residence to be built upon it).   We finally (okay, it was only a couple of weeks) got an offer that seemed to be acceptable to all parties and opened escrow.  Second problem was that while there were other homes sold in the last three months in the neighborhood, none were with post and pier foundations or with a lot as large.  Then the appraisal came in $40K less than the agreed upon price – not much value for the extra lot and no comps in the same area.  When the bank reviewed the appraisal, they decided that errors were made and took another $20K+ off of the value.  So now we have a buyer who was willing to pay more and a seller who was expecting more.  After much back and forth, it was agreed that the house would sell for some over the appraisal (based upon what extra cash the buyer could pull together) and after the first of the year to allow time for the sellers to find a property to exchange into.  Everything was set – and then the interest rates began rising.  The property finally closed but it was nail biting down to the end.

1623 Gamay Street

The home on Gamay Street is a short sale.  What that means is that the bank is owed more money than the house will bring in a sale.  Wachovia is the bank who holds the note and they have been proactive in addressing the issues.  My client was qualified for HAFA (Home Affordable Foreclosure Alternatives) which is a very good program for people who are losing their homes due to financial circumstances beyond their control.  The two major benefits of HAFA for the seller are that the loan is forgiven (meaning that the bank cannot come after the seller in the future to pay off the remainder of the loan) and the seller is given $3000 to cover moving expenses.  All was going well and then the appraiser climbed under the house and said that he observed a leak in the plumbing.  The bank said that there needed to be a licensed plumber called to remedy the leak.  Two inspectors had been under the house and did not observe a leak.  The plumber did not observe a leak.  We are awaiting a resolution from the bank.

The condo in Rohnert Park is in escrow with a bank.  Fortunately (based upon the two earlier examples) there is no loan and, therefore, no appraisal.  The challenge is that the bank wants everything done yesterday but seems to be taking their own sweet time about getting their end of the deal done.  I am sure that it will work out well but I expect that something out of the ordinary will happen.

This is real estate today.  Deals are getting done.  Nothing is easy.  Most buyers and sellers are stressed.   But the bottom line is:  When you need to sell, sell.  When you need to buy, buy.  There is no better time to do it.

When I return to Sonoma County from my vacation, I will be holding the home on N. Main Street in Sebastopol open and I will be listing a horse property on Sonoma Highway.  Watch here for details in early February.

417 N Main Street, Sebastopol - OPEN FEB. 13, 2011 1 to 4


Calendar

September 2021
S M T W T F S
 1234
567891011
12131415161718
19202122232425
2627282930  

Categories

Previous Posts

Other Topics Covered

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 737 other followers