Like many real estate agents I am getting more than a little ticked off at how the government banks are handling the foreclosures and the sale of homes and condos. In my opinion, they are running the real estate market right into the ground. Of course, right behind them are the appraisers who are actually "untouchable" now thanks to the HVCC Home Valuation Code of Conduct. One of my favorite blogger's Chris Griffith wrote about this recently. Right behind them are the underwriters who yes work for the banks.
So do I sound ticked off? Well I am and right now I am beginning to think it's some kind of conspiracy to cripple the middle class. No I am not going nuts it's just I am seeing first hand what is happening to the real estate market here in Macomb County, just outside Detroit. I just can't take it anymore and I think people need to know what's going on. I think the banks are holding real estate prices back.
Here's why -
- last month we sold a home that was listed at $149,000 it had 7 offers and our buyer offered $169,900. Now that means the market is talking right? Not quite - although our buyer's offer was the best and his offer was accepted the appraiser brought the value in at $152,000. So much for the market talking. The best part is this home sold in 1988 brand new for $150,000 and the township well they are collecting taxes based on a value of $241,000.
- a few weeks back we sold a condo for $92,000 actually we thought it was a pretty good deal. Guess our 20 years of real estate experience means nothing - the appraiser said it was worth $83,000. The estate was appalled because their mom paid $80,000 in 1979. Of course, they were forced to sell since we could not fight the appraiser.
- this tops them all - a condo sells for $83,000 this time the appraiser says it's worth $85,000 - ready for this one? The underwriter says No - she ran the automated evaluation system and said it was worth $73,000. What???
- here's one that I have first hand knowledge of - we bought a condo in 2003 for $105,000 bank owned. These units sold back in 1994 for $65,000 and in 1988 brand new for $58,000. But in the past 3 years the banks have ran the market right into the ground - $95,000, $62,500, $59,900, $49,900, $44,900, $40,500, $38,000. Urgh
Now remember Macomb County was NOT an area that went way up in value. No this area did not see double digit appreciation in a couple years. We had normal appreciation and then the banks came in and ran it right into the ground. The other day I saw a home selling in Detroit for $850 yep you read that right. No it was not a wreck. It was a 3 bedroom brick home with a basement and a garage and a few miles from where I grew up. Sick just sick.
So what do you think?
Hi Cindy, good to see you.
I'm seeing much the same thing and frankly I can't seem to get a handle on why it's happening.
I have a buyers home now in appraisal review (VA mortgage) and even though I know there are many solid comps for this home we're both still on edge until it comes out. I did my research very well, buyer made a darned good offer and everything is going well..yet there is the worry. (It's in Macomb Township, an area which I'm sure you know has been pretty darned stable the last 6 months or so) It's just the wizard behind the screen tactics that concern me. Is value even being set now between buyer and seller? Isn't that the way it should be?
Cindy, we are seeing it here too. I have an offer on a home in A2 for 205. It is VA and I am holding my breath.
The HAVCC has totally screwed our market. I have been meeting the appraisers at the properties to show them 6 comps, 3 active and 3 sold.
Now guess when this appraiser is coming?
SATURDAY, JULY 4TH CAN YOU BELIEVE THAT?
I just read an article that there is a new bill being introduced to, at least temporarily, halt the HVCC. Wish I could give more info than that, but not much was supplied.
While the HVCC has created it's own special problems, it's an appraiser thing, too. Appraisers are being overly cautious, erring on the low side of comps. The problem with appraisals in the first place is that they're a backwards looking tool. Appraisals are based solely on what has sold within the last 6 months. It doesn't take into consideration any comparable homes currently on the market (their list price) and it doesn't take into consideration the activity on the property (like 7 offers over asking price in 24 hrs).
The whole system needs fixed.
Kris yes value should be set by buyers and sellers. That's a true market. Good luck on your VA
Missy that is too funny a VA appraiser coming on a holiday and it's the 4th. Goog luck on yours too.
Ed & Cindy!
I used to live in McComb County! In Shelby Township. In a lovely two story in Victoria Estates. I loved it. But I am a Florida girl. My folks are down here, so I had to come back. But what you wrote about is happening here in South Florida too. I am so frustrated. I have a property in appraisal review right now and we are biting our nails.
Missy, take control of that one. Tell the appraiser your sellers can't do it that day. They have tons of people coming over with fireworks!
Cindy and Ed,
I feel too small and insignificant to comment under a billboard. (Hello, Robert, might you be a newbie?)
You've gotten whacked hard and it isn't just your area. Don't have a solution for you but do wish you all the best!
Ed and Cindy, Thanks for providing real world examples for everyone to 'chew on' for awhile. We reposted this blog for our readers. Perhaps if more people become aware of what is happening and put some pressure on our political "leaders" then something will be done to get this economy truly moving once again.
Thank you!
Tim
I look at the low inventory in some areas and price ranges in my market and think we could have a real mess on our hands if THOSE homes where there is demand can't get appraised and financed... to CYA of the appraiser or loan officer. Lots of buyers and sellers will be sorely disappointed and other price ranges, neighborhoods lots of inventory, no demand their formula may work on home values...
The comps build the case for the value and if you had multiple buyers after a place, the ability to pay above the appraisal is the slow way to itch and create comps that help support the market. Otherwise six month back reflections kick in. The appraisal if done right, reflects the market of similiar not foreclosure properties if a fair length Clark Kent listing sale.
The problem is that there are no objective uniform rules in place for the conducting of appraisals, especially when all other things being equal, the appraisers can use the lowest priced comps to justify their appraisal value, when there are higher priced comps that can be used (and vice versa). I agree with Roger - the whole system needs to be overhauled.
Real world examples like this abound across the country. The banks are, at worst, controlled by the government and, at best, running scared. The free market is NOT controlling property valuation and the real estate market, the government (through their control of lending institutions) is doing it. Yes, it does seem like a case of "revenge against the middle class" - I wonder, do affected people have the guts to stand up and throw out the incumbents in Congress?
Our prices have been going back to the early 2000's and we had double to triple digit price increases at the peak of the market (2005). I can't believe some houses in your area are going back to the 1980's pricing and you didn't have double digit increases.
The appraisers are becoming so annoying. I ma in a short sale situation where it is a BofA property and buyer is getting a BofA loan but their appriaser has cut the value by 20K ! I challenged it but it came back as denied. Sometimes it seems to me more that it is the appraisers ego more than anything else! And this appraiser has no clue about my area becasue she was sent from 50 miles away, go figure
I am in the Bay Area - primarily Berkeley and Oakland. We have been experiencing a new twist in this interesting market place for the past three weeks. We are again seeing multiple offers - real multiple offers. I have been involved from the Buyers side in two situations with 10 offers during this time period.
The scenario seems to be that first time Buyers - supplemented by artificially low interest rates and first time buyer incentives - are bidding to a point where homes are going into contract for 5-10% more than the same home would have sold for in February or March.
Then along come the appraisers. There are no comparables within the past 3 months to support the contract price and the appraisal comes in below what a number of the offering buyers would have been willing to pay.
Result: the Seller has to re-negotiate. Result: Buyers need to have more than 20% down to have their offer accepted.
I think Michigan is a victim of circumstance. I still own a property in Dearborn and luckily I have a very good renter. But, he works for GM, so I am a little apprehensive. Anyway, I think it is important to communicate with the appraiser and request they include specific comps if you have them. Appraisers are getting pressured, if they are not already required, to include distressed property sales in their appraisals. I would imagine that this varies by market, as here in our market we do not have the flood of foreclosures and shot sales that some markets have seen and tend to have a lot more good comps to support our home values.
well this is just shameful..i am holding my breath here in Philadelphia that I do not run into any issues. things have been so far so good on the valuation side of things this far. i haven't run into any issues. i actually had a house my buyer had an offer on appraise for 10k over asking price and that shocked me to the bone since i thought we were pushing the envelope with the price we had. oh lord please please please dont let me encounter this....smh....
We have experienced issues over and over and over with HVCC. I have had two low appraisals and one that came in needing repairs and the appraiser disappeared for two weeks on vacation for the reinspect! FRUSTRATING!
Hi Cindy and Ed,
I understand your frustration, and I feel your pain. I had the same thing happen to me about 1 week, 2 weeks, 3 weeks, ago. Come to think of it, just about every week since the new law was put into place. It's ridiculous, and it needs to be taken off the books.
-Lisa
I have a good one, I listed a Bank of America REO for $305,000, BPO and appraisals were in the 350 and 360's respectively to set the list price. Multiple offers, over 100 showings in 5 days, buyers were scrambling to buy this home that sold 4 years ago for 999,000 and was never lived in.
BofA accepts $363,100 which was the highest and best offer. Here comes the funny part, the buyer is using BofA for their financing. The buyers appraisal comes in at $350,000 and he gets a call from his BofA loan officer telling him the great news that the house did not appraise and that he will get to renegotiate. Remember this is coming from a BofA loan officer AND BofA owns the home. So essentially, BofA agreed to sell the home for $363,100 but would not finance based on that amount so they took another 13,000 haircut.
Weird
We are seeing appraisers do the same thing here, most are out of towners who don't even have access to comparables on our MLS
You have to admit you see a listing taken for way way more than it will ever appraise for. Somebody takes the bait buyer wise and then appraiser and his license is the guy/gal who says whoa partner. This is not going to fly. He is the reality in the situation where the sales agent that took the listing has a conniption but it was destined to be shot down in the beginning. And that is why three other brokers did not take the listing or waste the money on over priced inventory. I've had appraisers who are human make mistakes but the ones that have appraised for many years, seen the cycles and are on the ball, you can work with. Not all appraisers need to head to the chopping block and the entire appraisal process does not need to be overhauled. To say the appraiser is holding back the market..they don't make it, they reflect it. The sales report/rundown of competing listings, study of the days on market. That's all they do day in and day out unlike Joe Broker who has a slew of other jobs too like blogging..advertising, marketing and keeping buyers/sellers happy. That's why bankers don't go on to do their own appraisal inspection...they were not full time, licensed and knee deep in the process. I agree if an appraiser flies in from Neptune, way way out of his market, problems are bound to happen. If you thought at listing this will never appraise for what the seller wants and backed off, someone else could be raving about appraisers while you sell the realistically priced ones. The overpriced listings would make yours look like gold, a genuine bargain and to stand out.
Holy smokes I guess have hit a vain here!!
Roger - so right an appraisal is backwards - you need to let the market work
Terri - you got out of MI in the nick of time. Don't quit biting till it comes out of underwriting.
Robert - oops your photo came in HUGE. No Capitalism when it comes to real estate anymore
Irene - yes MI is getting beat up really bad. But the banks are for sure pushing it down daily.
Tim - thanks so much for the re post - As for the political leaders I don't think we have ANY
Welcome to what happens when career Politicians get involved in business.
It seems everyday there's a new rule put in place by banks or lending institutions. Every offer we make on a bank owned property has it's own hurdle we have to jump. There's no uniformity, no consistency, and no rhyme or reason to this market. The thing is, it's not the government making these decisions, it's the same C.E.O.'s who caused the problems in the first place. That's where the government went wrong in their take over of the banks. They should have replaced every C.E.O. of every financial institution they had to bail out. I see no difference between a bureaucratic bank and a bureaucratic government agency. Good post and best of luck to you.
Ed and Cindy, you have hit on a very true problem in the market. i agree strongly that Buyers and Sellers set the market value.
What's ironic is that the Fed could actually be propping up the market. Moratoriums on foreclosures and funny numbers to keep banks afloat... if banks had simply been allowed to fail, the ensuing collapse would have tanked the equity market to a much greater degree. All that bad debt would be absorbed by the financial sectors involved and the government would have lost a substantial tax base.
The HVCC has become such a problem that we have found buyers doing pre-emptive appraisals prior to making offers, and sellers doing reactive appraisals to refute the buyer's appraisal. The good news is this takes us out of the process completely, no one blames us for a low value, high value, wrong value, you name it.
And when it's our listing, and the lender's appraiser contacts us to gain access for the appraisal, regardless of what the HVCC regulations are, they still want to see the other appraisals. I never hand them directly to the appraiser, but I've heard more than once "I can't help it if they are out on the table"...
Very interesting times indeed.
What do I think? I think the selling banks sell at the market value no more and no less. Appraisers give an un-biased opinion of market value, no more and no less. And the lending banks are not going to lend more than a percentage of that market value. If you want prices to go up you need to find cash buyers that for some reason want to pay more than market price,
Lee County Florida was one of the craziest markets on the way up and we have been among the hardest hit on the way down. You may soon be seeing what we are seeing now....multiple offers, even bidding wars for the low end of the market, and over 40% of our sales are cash transactions. For example, my client bid 165% of the list price for a home (cash) and didnt get it
By the way Im thinking about Detroit, I saw a 2000 sq ft brick home there for sale at $4500. Im looking for a summer home...Detroit may be the ticket
I think that you are on to something, but there is an additional issue for the Detroit area... the population is shifting away. There are too many homes and not enough people. Unless the economy turns around there, it won't get better.
WOW. We are living in crazy times. My definition of market value is what a READY, WILLING & ABLE buyer will pay for a property. What's yours, mr bank?
Ed and Cindy:
Your premise that banks are holding prices back may have some merit, as less credit available leads to lower demand and lower demand leads to lower prices. However, I must point out that I heard very few complaints when easy credit lead to higher demand and higher prices.
Please be aware that appraisers don't write the news, we only report the news. If an appraisal is based upon the most recent, most similar (in terms of market determinant factors), and most proximate sales and listings available, then the result is a well supported opinion of value.
Maureen - CYA is something they should have thought about years ago
Andrew - all they use here is foreclosures in the comps
Willam -Overhauled is an understatement
Margaret - so so true - as my own condo shows - banks are running the marlet into the ground
Michelle - no double digit pricing here - Detroit prices go way way way back
Rama - Have yet to see any appraisals get over turned
Chris - my agents are also writing over and over for the same buyers due to multi offers
Eric - only comps they use are bank owned and short sales - the banks ran the market into the ground
Dee - even if the appraiser writes higher the underwriter write it down ( saw this a few times)
Renee - HVCC issue is being directed by the banks - which the govt is running now
Lisa - yes ever deal anymore is nuts till closing
Jeff - this is nuts more proof the banks are controlling the market
I thought the whole idea of fair market value was what a ready and able seller would take from a willing and able buyer. Did I miss something somewhere that changed is so drastically?
Andrew - no over priced listings here the banks just reduce reduce reduce - look at the ex of my own condo
Paul - could not have said it better
Jerry - CEO or govt - someone is screwing the middle class
Dave - they will collapse if they don't quite running the market into the ground
Christianne - not only HVCC but the banks pricing lower and lower
Ron - not true the banks price super low hold off acceptance sometimes for a week, get multi offers and then the appraiser finds the lowest sold Without knowing that it was stripped, full of mold ect. I know Lee county well - You guys had over inflated prices something we never had and you are not back to 70-80's prices - Nothing in my area selling for $4500 for $2000 sq ft YET
Lane - the press says the population is shifting - we can;t find homes for our buyers they are flying off the shelves. Detroit lost people but not Macomb County
Erica - Right On
Sometimes conspiracy theories aren't as farfetched as supposed. If there isn't a concerted effort to destroy America's #1 investment choice -- an investment choice most of us live in -- then I don't know what.
Are they being held "back" or are they "propped up"? If the banks are holding back 35% or more of their REO inventory and not foreclosing for many months (highest I personally know of is 14 months with no payments) then the banks are attempting to prop UP the prices by rationing REO sales.
The banks and wall st. manipulated the market on the way up and now are still manipulating the market on the way down. Bad faith negotiations on short sales and modifications, ridiculous delays on both short and REO sales, no internal communications and only doing what they are forced to instead of doing ANYTHING because it is either the right thing to do for the client or the economy as a whole. It is lie, rape and pillage as usual.
What would happen if we as Realtors simply STOPPED representing or offering on Short Sales? Most of our Short Sale clients should be seeing their financial advisors and/or bankruptcy attorneys instead of spending their last dime of retirement savings trying to make payments on a house that was NEVER worth what they paid, regardless of what the "appraisal" said at the time and will not be again for 10 to 20 years (if EVER in terms of dollar value).
The banks are investment partners in the homes that they loan money on but they will never admit this, instead choosing to lay it all at the feet of the homebuyer who did everything right, believed the appraisal and the "market" at the time. If that were not true then why do they hold the house as "collateral" and insist it appraise to purchase price? Even when they agree to a Modification they leave as much of the upside down equity on the shoulders of the homeowner as possible to deal with at a later date.
Jessee - we are not seeing credit issues here - no low demand - plenty of multi offers - so we have the buyers - my ex home sold in 1988 for $150 and it sold today for $152 even though we had multi offers the appraiser brought the price Way down
Christine - You missed nothing - this is how a market goes up but it is being forced down
Judy - 20 years in the business Nevr thought I would see this - Unless???
Marston - I don't think they are being propped up at all here - the banks and appraisers keep pushing the market down more and more