Real Estate

[Jack Frederick]

Given the market is tightening everywhere, we definitely timed our move at the wrong time so we are not coming out of the sale/buy on our new place. That is the market and that’s the way it is. I’ve not bought a lot of property in my time but the process kinda sets me off. My complaint is the process, specifically, the appraisal. The lender selected an appraiser known for his conservative views on valuations according to the realtor group we have. Now, our property is old by CA standards, showing on maps from the 1860’s. It is known locally as the “Cabin in the Sky” and has that on a sign hangin off the front of the house. A grandson of the 1920’s owner said the sign was there when his Grands bought it back then and the views are spectacular to the W. The appraiser, comes in and does his walk through and gave no value to the view as it was not visible from the living room, which faces the road. We completely re-built this place in 13/14 and actually talked about switching the lay-out, but the best parties are kitchen parties and on out to the yard so we have a fabulous view out the 8’window and the 6’ on the side. That valuation is according to the realtor worth about $40k of value. My bi*** is the complete arbitrariness of this opinion and as a result the places did not appraise at value that we had agreed with the buyer, and why would the bank want a higher value in this market with all that is going on, so there it sits. The lender ignores appeals and it is a one and done deal. I think the place has a view. What do you think? Oh, and that tire swing in the picture hangs 16’ off the 54” blk walnut beside the house. the grandkids have loved it but it scares the heck out of you when they are flying so high;)

[Tom M King]

Is this Realtor working for the seller, or buyer? It doesn't sound right to me, but I've only sold houses sitting on real estate, and done some developing, for almost 50 years now.

[Ron Citerone]

Funky stuff goes on in the appraisal business. That's been my personal opinion based on my limited experiences with it. Nuff said.

[Doug Garson]

I haven't bought or sold much real estate but I'm confused by your post. I assume you are selling, so why are dealing with the buyer's lender? A property is worth whatever a buyer is willing to pay regardless of any appraised value. The appraised value comes into play when the buyer tries to get a mortgage so it is his problem. Shouldn't it be up to the buyer to find a lender that is willing to finance his purchase?

[Mike Henderson]

Games are played in buying and selling property. A buyer may want a low appraisal because they go back to the seller and say, "Here's the appraisal and that's all my mortgage company will finance it for. You need to drop your price to the appraisal."

Unless you're really pushed to sell, your response should be, "You'll have to put more up front to pay it down to the mortgage amount."

Or offer the buyer a second mortgage for the difference between your price and the appraisal value. There's risk in that, of course.

Or walk away.

Mike

[Ron Citerone]

I haven't bought or sold much real estate but I'm confused by your post. I assume you are selling, so why are dealing with the buyer's lender? A property is worth whatever a buyer is willing to pay regardless of any appraised value. The appraised value comes into play when the buyer tries to get a mortgage so it is his problem. Shouldn't it be up to the buyer to find a lender that is willing to finance his purchase?

Doug I understand your point. The problem is if the buyer can't get the mortgage the deal falls through. Now it's a problem for both the buyer and seller.

[Tom M King]

When I was selling spec houses, I used one Savings and Loan company. They would come look at a house I had ready, and I would send them the buyer when one came along. I never used a Realtor, but had the financing lined up for anyone who needed it. As years went on, the Savings and Loan company never even came out to look at the houses. They were ready to go when a buyer came along. It never took over two weeks once I put a price on a house, and I didn't put a price on until I had finished it, had all my tools out, and was ready to let it go.

I don't know if you can do that or not, but I'd look for another bank.

[Mike Henderson]

Doug I understand your point. The problem is if the buyer can't get the mortgage the deal falls through. Now it's a problem for both the buyer and seller.

In most cases the buyer can get a mortgage but it will be for 80% of the appraised value. That means the buyer has to put up the rest of the money, either in cash from their pocket or in some other second mortgage financing. A lot of buyers don't have that much money available.

The 80% is for a conventional mortgage. It could be for a 90% mortgage or some other type of mortgage. In any case, the buyer has to make up the difference between the selling price and the appraised value.

Mike

[Bill George]

Hire another Appraisal your own choice and see how it compares. It may cost you a couple thousand but then you have something to work from.

[Bill Dufour]

I do not want to get too political but people hire one appraiser for taxes, one for buying and another for selling. The legality of this will soon be decided in courts.
When my brother bought cars he always paid some in cash and some in check. He told the DMV the fees are based on the check price only, no cash was involved.
Bill D

[Dave Zellers]

Hire another Appraisal your own choice and see how it compares. It may cost you a couple thousand but then you have something to work from.

Yes this. Or if you have a feel for what your property is worth and are not pressured to sell, tell your realtor your selling price. They can choose to represent you or not. They want to move it as fast as they can, because that's where the money is. Don't let the system push you around. It's your asset not theirs.

[Jim Becker]

We bid high and got some of that back from the appraisal coming back lower as well as the inspection that allowed me to come up with a hefty list of stuff that needed remediated. Fortunately, our buyers didn't blink and said yes without hesitation. They still got a whole bunch more than the listing price, too.

Our previous property sat for 9 months before we found the right buyer...and at substantially less than we originally listed it. Sometimes it's like that and paying two mortgages plus a bridge for nine months only to get a whole bunch less in the end was a little painful. At least financially. The buyers are great and just introduced their first son to the world.

[Doug Garson]

Doug I understand your point. The problem is if the buyer can't get the mortgage the deal falls through. Now it's a problem for both the buyer and seller.
Agree, but how can you negotiate with the buyer's lender? You can't make any commitment on the buyer's behalf so why would the buyer's lender negotiate with you?

[Bruce Wrenn]

When I had a Broker's Licensee, took an appraisal class. Instructor placed one value on a item in a property, but the whole class (some with more years of experience than instructor) placed a much greater value on same item. Just shows that "beauty is in the eye of the beholder." When we financed our house (1981) closest comp was over ten miles away, single story vs two story, in an abandoned cow pasture with NO TREES. Not exactually a comp! But it really didn't matter, as we had over 50% equity in house, plus we owned the lot between us and the road.

[Doug Garson]

When we sold our century home back in Cambridge Ontario 25 years ago, our real estate agent had an agent's open house. All the agents agreed it was a great house but that she had overpriced it. It sold in less than a week for full asking price. So yes, not all experts agree and the value is whatever someone is willing to pay.

[Bob Borzelleri]

We had our home appraised several years ago for a refinance to take advantage of tanking interest rates. The initial appraisal mischaracterized our sq ft total by 300 sf. He ignored two sales on our street of 8 5 acre parcels and came up with two comps that were nearly 20 miles away and 20+ years older than our house.

I protested the appraisal to the lender and they agreed to send someone else out. Suddenly the house went up nearly $200K. Appraising can be a fast and loose art form.

[Thomas McCurnin]

I guess I am not understanding why the appraiser is involved at all.

Seller sets a price. Buyer agrees to a price. Property sells.

Only a fool would accept an offer which is contingent on financing--that is the Buyer's problem.

Buyers should already have loan approval and assuming a substantial down payment, like 30-50%, any lender appraisal should easily cover that amount of debt. In any case, it shouldn't be your problem.

Re-list the property with no contingencies except inspection, sale to close within 60 days, or the deal is off.

[Brian Elfert]

I guess I am not understanding why the appraiser is involved at all.

Seller sets a price. Buyer agrees to a price. Property sells.

Only a fool would accept an offer which is contingent on financing--that is the Buyer's problem.


If the buyer can't get financing are you going to sue the buyer to complete the sale? Mortgage companies typically require an appraisal as a condition of lending the money.

[Bill George]

I guess I am not understanding why the appraiser is involved at all.

Seller sets a price. Buyer agrees to a price. Property sells.

Only a fool would accept an offer which is contingent on financing--that is the Buyer's problem.

Buyers should already have loan approval and assuming a substantial down payment, like 30-50%, any lender appraisal should easily cover that amount of debt. In any case, it shouldn't be your problem.

Re-list the property with no contingencies except inspection, sale to close within 60 days, or the deal is off.

The appraisal is needed for the loan. You must not have sold property much, people do not normally have $400,000 or? cash to purchase a house or whatever and need a loan. That is why I suggested he get an independent one of his own. Right now its a buyers market and sometimes if you need to sell its not what you really wanted for the selling price.

BTW there are a lot of sales made subject to getting financing, that's just the way it works in real estate sales.

[Ronald Blue]

If the appraisal was done as they are here they list comparable properties to back up the amount they arrive at for value. Right or wrong it's the accepted method. If there are special features that you aren't getting credit for there might be an appeals process available. Also you may want to get it appraised by someone not connected to the purchase. As others have said the buyer can only get a loan based on the appraiser's valuation. Sentimental value isn't taken into consideration. If you don't have to sell maybe you should wait if the market is soft.

[Jim Becker]

Comps are not always reliable. In my little story above, that was absolutely the case with our old property. The comparables were within reasonable distance, included the historical component, property size, square footage, premium amenities, etc., but they did not balance out things like perceived road noise, a close neighboring structure, etc. The demographic that would and could pay the money rulled the property out because of outside factors. That cost us...two hundred grand.

[Mike Henderson]

If the buyer can't get financing are you going to sue the buyer to complete the sale? Mortgage companies typically require an appraisal as a condition of lending the money.

If there are no contingencies and the buyer refuses to go through with the purchase, the most common relief is that the buyer loses his/her deposit. In this area, no matter what the buyer does, it's difficult for the seller to keep the deposit.

Technically, the seller could sue to try to force the sale, but if the buyer doesn't have the money, that's not going to work. If the seller then sells the property for less, sometimes the seller can bring an action against the original buyer to recover the difference. But the amount of money usually makes that not worth while.

Mike

[Jim Koepke]

Jack, you do not mention the acreage or if there is an orchard of fruit trees.

When the wife and I were looking for property in Northern California we found some wonderful places in an area we liked. That was about a year before we were ready to commit. When we went up the next year prices had doubled and even more in some places.

What happened? Turns out the Los Angeles Times ran an article about how nice and livable the area was. So many people ready to retire sold their homes in Southern California and purchased retirement homes on the Northern California coastal area. This was the Eureka California area in 2007-2008.

Not sure if you live anywhere near the coast or not.

My thought is you may want to run an advertisement to appeal to a Southern California audience.

Things that might be impressive is picture of a good garden.

Maybe a woodlot for winter heat.

How is the hunting in your area?

Do you get snow in the winter?

Do you have a well?

How far is it to amenities like groceries and medical services.

How far away and how many neighbors?

My home is out in the sticks, a fair number of houses around with average of 5 acre lots. At night it is quiet enough I can hear a creek running that is about a hundred yards from my bedroom.

The art of selling is finding the target market and selling the view and other desirables.

Some about to retire sunset lover would jump at the chance to be sitting at your kitchen table with a beer or a cocktail and just taking it all in.

jtk

[Rick Potter]

As I understand it about 15 years ago CA passed a law requiring the lender to use an assigned appraiser, from a pool, rather than using their own, or choosing a specific appraiser who was known to "lean' one way or the other. I suppose they could contest the appraisal and possibly get another.

I know this was still in effect in 2020 when I bought my last property. I think it went into effect after the '06-08 reset.

[Thomas McCurnin]

If there are no contingencies and the buyer refuses to go through with the purchase, the most common relief is that the buyer loses his/her deposit. In this area, no matter what the buyer does, it's difficult for the seller to keep the deposit.

Technically, the buyer could sue to try to force the sale, but if the buyer doesn't have the money, that's not going to work. If the seller then sells the property for less, sometimes the seller can bring an action against the original buyer to recover the difference. But the amount of money usually makes that not worth while.

Mike

+1

This is how one sells property these days. No contingencies. The appraiser becomes irrelevant for purposes of the Seller. If from the Buyer's side, the appraisal is low and the Buyer can't get financing, then after 60 days, the deposit is given to the Seller as liquidated damages, and the Seller can re-list the property.

Having a sale contingent on Buyers' obtaining a loan could conceivably stretch out the process for months and months and might be a nice bargaining chip for the Buyer to lower the price significantly. Don't do it, sale is listed with no contingencies.

[Doug Garson]

Can't imagine anyone making an offer without getting pre approved for a mortgage or making the offer contingent on financing. Also making an offer not contingent on a home inspection would be dangerous, can't imagine anyone doing that either unless it is a red hot seller's market and they are desperate.

[Bill George]

+1

This is how one sells property these days. No contingencies. The appraiser becomes irrelevant for purposes of the Seller. If from the Buyer's side, the appraisal is low and the Buyer can't get financing, then after 60 days, the deposit is given to the Seller as liquidated damages, and the Seller can re-list the property.

Having a sale contingent on Buyers' obtaining a loan could conceivably stretch out the process for months and months and might be a nice bargaining chip for the Buyer to lower the price significantly. Don't do it, sale is listed with no contingencies.


This is how one sells property these days.

That does not happen today in this Buyers market. Loans are hard to get on good terms, Interest rates are high. Maybe in California but not the rest the country. The Buyer does not automatically forfeit the Earnest money to the Seller.

[Ron Citerone]

Can't imagine anyone making an offer without getting pre approved for a mortgage or making the offer contingent on financing. Also making an offer not contingent on a home inspection would be dangerous, can't imagine anyone doing that either unless it is a red hot seller's market and they are desperate.

The issue isn’t so much the pre approval for the buyer, it is the bank doesn’t want to lend more than the house is worth. That’s how I understand it. My first buy almost fell through because the banking market was swamped. I had a contingency clause, but the agent drove to the bank in town to get the check. Home inspections are a get out of jail free card for buyers in some cases.

[Thomas McCurnin]

Really depends on the down payment. If a buyer puts down 20-30%, loan to value would be very appealing to a bank. Interest rates are under 6% for new purchase with that kind of down payment.

[Ron Citerone]

Really depends on the down payment. If a buyer puts down 20-30%, loan to value would be very appealing to a bank. Interest rates are under 6% for new purchase with that kind of down payment.

Sure, the bank wants to know they can get the loan balance back if they have to foreclose.

[Thomas McCurnin]

The other thing which hasn't been mentioned yet, is the role of the real estate agent. A local professional real estate agent knows real estate values and comps just as much and perhaps more than an appraiser. Hire a good real estate agent and get the three magic numbers--listing price (high), probable low value (rock bottom), and the Cinderella sweet spot (the middle, what the property is actually worth, and the likely purchase price). Trust your agent's advice. Homes will sell for a higher price if vacant, so the buyer can see exactly what he or she is buying. Also the home is easier to spruce up if vacant, like drywall and electrical sockets.

If the bank appraisal is way off target from your own real estate agent's opinion, then it might be time to either sit out the market (let it sit on the market for a month or two) or lower the price.

Ultimately actual recent real estate sales are indicative of the property's value. Obviously there are variables (you'll see them as a + or - in the Form 1004) such as number of bedrooms, HVAC, remodeled kitchens and baths), number of baths, fireplaces, swimming pools, upgraded electrical and the like). Those variables might drive the value (and the purchase price) up or down by as much as 15%, but not as much as anyone thinks.

[Jim Becker]

Not appraising high enough doesn't necessarily stop the buyer from getting the property, depending on how the contract offer was written and other factors, such as state law since that's where the actual contract form comes from. With the correct boxes checked, the buyer can often take the risk of it not appraising and make up the difference between appraised and the offer when a lender will not provide financing beyond a certain amount with a given appraisal number. We did exactly that for this property we live in now. We took the risk on appraisal, but got lucky that the seller blinked anyway and allowed the sale at a lower cost as I mentioned previously. We only took a $5K hit that way (after another reduction because of inspections) which we were already prepared to pay it.

[Mike Henderson]

Having a sale contingent on Buyers' obtaining a loan could conceivably stretch out the process for months and months and might be a nice bargaining chip for the Buyer to lower the price significantly. Don't do it, sale is listed with no contingencies.

Unless the market is really hot, it's tough to sell without an inspection contingency. Any rational buyer would want to know what they're getting into.

My wife and I sold a condominium without any contingencies but the buyer, who was a contractor, did an inspection on his own before he put his bid in.

Mike

[Perry Hilbert Jr]

25 years ago, there were a lot of crooked appraisers ut there and a few were prosecuted. I know of one that appraised a house and gave a value on the house and the 2 car garage with in-law apt over the garage. It was supposed to be an in person appraisal. The garage had burned down 6 years earlier and was never rebuilt. Jus a concrete pad where the garage had been. That guy was convicted. Most appraisers reined in their appraisal values after a few of their colleagues went to jail.

One tactic that might be useful, is to get an appraiser to come and advise you what minor things can be down to increase the appraisal. Some times it is simple things. An auctioneer buddy who sells a lot of real estate came and walked through our place and told us a few things to do to get a higher appraisal for a bank loan.

While real estate maybe tight. My neighbor just got a contract on her house for 14 K over the asking price. .A steep wooded property on the next road, 28 acres with 25 yr old double wide, dirt driveway and parking area. no out buildings, just brought $556,000, a month ago.

[Brian Elfert]

Not appraising high enough doesn't necessarily stop the buyer from getting the property, depending on how the contract offer was written and other factors, such as state law since that's where the actual contract form comes from. With the correct boxes checked, the buyer can often take the risk of it not appraising and make up the difference between appraised and the offer when a lender will not provide financing beyond a certain amount with a given appraisal number. We did exactly that for this property we live in now. We took the risk on appraisal, but got lucky that the seller blinked anyway and allowed the sale at a lower cost as I mentioned previously. We only took a $5K hit that way (after another reduction because of inspections) which we were already prepared to pay it.

There are a lot of buyers who would not have the cash to cover the difference.

[Jim Becker]

There are a lot of buyers who would not have the cash to cover the difference.
Agreed. But my point was that it's an available option. It's honestly the same situation relative to inspection contingency. The successful buyers of our old property opted for an "informational inspection", but there was no contingency for the sale on that inspection. It was "as is" legally. (and there really were not any issues given I had taken care of them already) But they were also buying the property with an offer price that meant we could get to close quickly and not have to pay for two properties anymore (despite the pain to us around the lower net)

[Brian Elfert]

Appraisals are crazy things. I had an appraisal done about two years ago and it came in lower than anyone thought it would. I had an appraisal done a year later and it came in a good 30% higher. It was higher than I thought the house was worth.

[Jim Becker]

The most interesting appraisal experience I had with the old property was that the guy that same out for the buyers was the same guy who did the appraisal for a refi years ago. He (and we) had ages, but he remembered the last visit and we had a nice group chuckle about it. (there is a pool used an this was just the "luck of the draw" that he got the assignment that day)

[Thomas McCurnin]

Mortgage rates down for two weeks in a row. Good news for Buyers. Usually lower rates are bad news for Sellers, as more buyers drives market values of homes down.

https://www.cnn.com/2023/03/23/homes/mortgage-rates-march-23/index.html

[Mike Henderson]

Mortgage rates down for two weeks in a row. Good news for Buyers. Usually lower rates are bad news for Sellers, as more buyers drives market values of homes down.

https://www.cnn.com/2023/03/23/homes/mortgage-rates-march-23/index.html

Are you sure you didn't reverse Buyer and Sellers? When you have more buyers chasing a product the price usually goes up. For example, in the stock market.

Mike

[Also, as rates go down, buyers can afford to pay more because they mostly worry about their monthly payment (cash flow), not the total amount.]

[Andy Pogue]

Given the market is tightening everywhere, we definitely timed our move at the wrong time so we are not coming out of the sale/buy on our new place. That is the market and that’s the way it is. I’ve not bought a lot of property in my time but the process kinda sets me off. My complaint is the process, specifically, the appraisal. The lender selected an appraiser known for his conservative views on valuations according to the realtor group we have. Now, our property is old by CA standards, showing on maps from the 1860’s. It is known locally as the “Cabin in the Sky” and has that on a sign hangin off the front of the house. A grandson of the 1920’s owner said the sign was there when his Grands bought it back then and the views are spectacular to the W. The appraiser, comes in and does his walk through and gave no value to the view as it was not visible from the living room, which faces the road. We completely re-built this place in 13/14 and actually talked about switching the lay-out, but the best parties are kitchen parties and on out to the yard so we have a fabulous view out the 8’window and the 6’ on the side. That valuation is according to the realtor worth about $40k of value. My bi*** is the complete arbitrariness of this opinion and as a result the places did not appraise at value that we had agreed with the buyer, and why would the bank want a higher value in this market with all that is going on, so there it sits. The lender ignores appeals and it is a one and done deal. I think the place has a view. What do you think? Oh, and that tire swing in the picture hangs 16’ off the 54” blk walnut beside the house. the grandkids have loved it but it scares the heck out of you when they are flying so high;)

I feel for you. It is hard to see a good place undervalued. We have a house in Tennessee for sale. The one on one side sold at peak of prices at 700k for a smaller and much less well made home.( new owners have spent big bucks to update)
Home on other side is listed for over 800k and has no garages.
Our agent says we should expect 660k at best.
Ours is bigger, nicer and better maintained, in my humble opinion.
I guess I ought to be happy with the appreciation in the years we’ve had it, but wish we had been ready to sell at peak of the frenzy!

[Bill George]

Mortgage rates down for two weeks in a row. Good news for Buyers. Usually lower rates are bad news for Sellers, as more buyers drives market values of homes down.

https://www.cnn.com/2023/03/23/homes/mortgage-rates-march-23/index.html

Huh? Lower rates drive more Buyers to the market it then swings to being to the Sellers advantage to have more people shopping for homes. Prices tend to be higher. One of the largest employers here Wells Fargo mortgage department laid off thousands of people because the high interest rates have depressed home sales.

[Thomas McCurnin]

Higher interest rates mean higher price growth, e.g., the value of real estate goes up. Supply and Demand. Higher demand means higher prices.

This explains it. https://www.latimes.com/business/story/2022-04-20/mortgage-interest-rates-rise-will-southern-california-home-prices-drop

[Mike Henderson]

Higher interest rates mean higher price growth, e.g., the value of real estate goes up. Supply and Demand. Higher demand means higher prices.

This explains it. https://www.latimes.com/business/story/2022-04-20/mortgage-interest-rates-rise-will-southern-california-home-prices-drop

It's true that higher demand drives prices up, but higher interest rates cause a reduction in demand because potential buyers cannot afford the homes at the existing prices. So prices fall. That's what's happening right now in the market. The peak of prices was perhaps a year or so ago when interest rates were 2%.

Mike

[Jim Koepke]

It's true that higher demand drives prices up, but higher interest rates cause a reduction in demand because potential buyers cannot afford the homes at the existing prices. So prices fall. That's what's happening right now in the market. The peak of prices was perhaps a year or so ago when interest rates were 2%.

Mike

Houses have a price to interest rate ratio that can be compared to bonds. As interest rates rise prices tend to drop. The big difference is a bond has a set limit on its appreciation whereas a house can rise or fall without limit.

jtk

[Bill George]

Higher interest rates mean higher price growth, e.g., the value of real estate goes up. Supply and Demand. Higher demand means higher prices.

This explains it. https://www.latimes.com/business/story/2022-04-20/mortgage-interest-rates-rise-will-southern-california-home-prices-drop

I really don't know where your getting your line of reasoning from, but Home sales are down nation wide. People have houses without buyers because of high interest rates. Wells Fargo here has nearly shut down their mortgage loan department. Big difference between a 30 year loan at 2% vs the now 6% or more that why the housing market is depressed. That news clip from above is over a year old, and its not correct for todays situation.

[Jim Becker]

Bill, properties are still selling quickly here...despite the pain of the higher rates...because there is still not enough available housing for the demand. (Apartments are also hard to come by and rents are way up because of that)

[Dave Fritz]

Housing demand is regional. Our region is bad, sixty miles east it's crazy. Real estate is location, location, location.

[Jim Becker]

That is indeed very true, Dave.

[Bill George]

The housing market is starting to come back in the past two months but the past year had large sales drop. Prices are down perhaps 1% but interest rates remain higher than in the past. Our house value according to Zillow dropped 1/2 percent. Its regional for sure and California has always had a hot market.

A current link:
https://www.forbes.com/advisor/mortgages/real-estate/housing-market-predictions/

[Jim Koepke]

Its regional for sure and California has always had a hot market.

Parts of California have had a hot real estate market at times.


Vacancy rates in San Francisco hit an average of 27% in 2022 according to the CBRE real estate firm this week, jumping up from 19% in 2021 and 4% in 2002, becoming the highest vacancy rate the city has seen since the early 1990s.

Tech layoffs are making it worse.

Parts of Northern California near the border with Oregon are nice. Further inland there isn't much of anything there.

jtk

[Jared Sankovich]

Higher interest rates mean higher price growth, e.g., the value of real estate goes up. Supply and Demand. Higher demand means higher prices.

This explains it. https://www.latimes.com/business/story/2022-04-20/mortgage-interest-rates-rise-will-southern-california-home-prices-drop

You have that backwards, and your cited article even is in agreement. Higher rates mean less available cash, dropping the value.

In this case demand is high because of the supply issue, but values have nominally decreased due to the increased rates.