Читать книгу Real Estate Rescue - Tracy McLaughlin - Страница 9

Checklist—Environmental Factors Is there ambient road noise? What is the microclimate in the area? What is the quality of the light? What is the orientation of the house? Does it face west or south? Does it get direct sunlight? Are there nearby cell towers? Are there overhead power lines? Does the home have privacy? Is it located near a drug shelter or a homeless shelter? Is there airport traffic? Is the home under a flight path? Are there issues with air or water quality? Are there soil issues that would impact the cost and feasibility of use and future development?

Location

The two largest generations in America’s history are dramatically shaping not just how, but where, people want to live. The baby boomers (born between 1946 and 1964 and numbering approximately seventy-seven million) and their millennial offspring (born from 1977 to 1996 and estimated around seventy-eight million) are waving goodbye to the car-centric McMansion era of oversized, ill-proportioned homes in favor of a more community-oriented lifestyle. As the boomers near retirement age, there’s a trend to downsize and move into one-level homes in walkable, transit-friendly neighborhoods near suburban centers or mixed-use zones. Millennials tend to value efficiency and technology, and gravitate toward areas offering a mix of homes, stores, and other businesses within a short walk. In a National Association of Realtors research survey18, the number of people who preferred a mixed-use suburban neighborhood was more than double the number who preferred a suburban neighborhood with houses only.

As suburban congestion increases, people place a greater premium on homes that have close proximity to freeways or public transport. In the San Francisco Bay Area, for example, commuters with a thirty-minute trip from home to work under congestion-free conditions spend 143 extra hours driving annually because of traffic.19 What were once B-grade locations closer to the freeways to San Francisco now have greater cachet with buyers who want shorter commutes.

The era of living behind gates up long driveways has waned. There has been a return to village community living—valuing sidewalks, knowing one’s neighbors, and dropping the hedges.

Checklist—Location Is the home in the flats or in the hills? Is it walking distance to town? If a suburban home, does it have access to freeways? Does it have a “village” lifestyle? Is it walkable to goods and services (school, town, shopping)? Does it have easy access to bus or metro lines? Does it feel secure and protected?

An Appraisal of the Appraisal

While an agent performs a CMA, a lender’s professional appraiser will perform their own appraisal, an unbiased opinion, of a home’s value. Unfortunately, they don’t always yield the same results, and this can be frustrating. Why the discrepancy?

The differences are largely driven by who’s doing the evaluation and its purpose. Agents produce CMAs for their clients to assess the purchase or sale price. A lender’s agent, by contrast, performs an appraisal on behalf of the bank to verify that the lender is not making a loan for more than the home is worth. In theory, the appraiser is supposed to be protecting not only the bank, but also the foolish buyer who is willing to pay too much for the property.

An appraiser has no financial ties to the transaction and delivers a defensible and carefully documented opinion of value devoid of bias. A commissioned agent, by contrast, is a stakeholder in the transaction.

Home buyers want high appraised values so they can get a mortgage. Mortgage lenders want conservative values so that their loan is less risky. Appraisers are caught in the middle.

Historically, lenders and agents were directly involved in picking appraisers, but in the wake of the 2008 housing crisis, Fannie Mae and Freddie Mac instituted the Home Valuation Code of Conduct to prohibit handpicking appraisers.20 The Code was designed to make it difficult for lenders to pressure appraisers into dishing up the “right” value. A bank must now use an appraisal management company to pluck an appraiser from its pool.

Appraisers are given a copy of the home purchase contract, so they know the purchase price. This may seem odd, but the appraisal is done to support a specific purchase price, and not to generate an independent purchase price. That’s why many appraisals will often substantiate the agreed price. Doesn’t this mean the appraiser’s opinion of fair market value is necessarily influenced by the purchase price? It does not. The idea is that appraisers are uninterested parties selected at random—they earn no benefit for rendering a particular valuation.

Agents’ and appraisers’ valuation methodologies overlap—both are influenced by recent sales of similar properties and current market trends. An appraiser, however, is held to more rigorous standards. An appraiser must determine that the theoretical buyer or seller is “well-informed,” and can make decisions without “undue stress” and engage in an “arm’s-length” transaction.

Just because a home sells at a particular price, that doesn’t mean that’s its market value. If a parent sells a home to a child at a discount, that doesn’t become the new price benchmark in that neighborhood. Conversely, when a property is bid up with multiple offers, that price doesn’t necessarily reflect market value by appraisers’ standards.

A property in San Francisco’s frenzied real estate market had nineteen purchase offers. The appraiser, however, rendered a valuation much lower than the purchase price because the comps didn’t support the sales price. The buyer was angry with the appraiser: “What do you mean you can’t support the price? How can you say it’s not worth that price if eighteen other people are willing to pay what I’m paying?” The appraiser responded, “If all it took were a ratified contract to validate the worth of a property, banks wouldn’t need to have an appraisal done. In a market where there’s a feeding frenzy, things get bid up above what can be supported by the best comps. No closed sales support this price.”

To some degree, appraisers are always chasing the market with historical data.

I’ve had many situations where I’ve said to clients, “This home may not appraise out. I’m not saying you are paying too much. It’s just about the comps. So be prepared.” Most of the time in higher-end markets, the buyer is willing to put more money down to reduce the loan-to-value (LTV) ratio to close the sale.

Does a Valuation or an Appraisal Better Reflect the Market Value of a Home?

Agents’ and appraisers’ valuations serve different functions. The question of which better reflects the market value of a property ultimately depends on the definition of “market value.” If market value means the most probable price that a property should be worth in a competitive market where there is no undue stress to buyers or sellers, an appraisal is a better tool.21 If your definition of market value is the price a home would sell for in the current market, an agent’s valuation is more relevant and timely.

Appraisals are supposed to mimic the market, but their valuations often lag the market, particularly when it’s moving quickly. If inventory is thin and prices are soaring, finding accurate and timely valuations that support sales is challenging—and lenders don’t want to risk funding or selling a loan without a supporting valuation.

Agents know more about current value than appraisers because they are intimately familiar with properties in their market. Agents know the history and story of each property. They know other agents and the dirt about what’s going on. Agents cover a limited geographical area, whereas appraisers cover a wider territory and don’t possess the same exhaustive local knowledge. For these reasons, appraisers rely on input from agents. I routinely receive calls from appraisers about properties in my community, even about homes I’m not representing, because they know I have valuable information that can’t be found on the MLS or gained from a brief visit to the property.