by Jim Stakem 6/10/2009
Sellers just can't seem to get a break. Now that the market is moving again, prices have stabilized, time on the market is down to three months or less and the inventory is low. You would expect these to be good times for sellers! You might even anticipate some increase in value! There are a number of issues which continue to have a negative effect on home values.
The first of these is the appraisal. Appraisers can't win. Just a couple of years ago, when the market was hot, appraisers were giving very liberal appraisals (at the bank's instruction) and when the financial crisis occurred much of the blame was directed toward “inflated appraisals” . The reality is that the banks wanted to make the loans and they wanted those high appraisals. As always in life, the pendulum has shifted. The financial institutions are being extremely cautious and developing very conservative guidelines on appraisals. Banks want to do their best to make sure they are making good loans. Appraisers have to find the comparable property in a close proximity and have less flexibility to adjust for the intangibles such as end units, lot size, location, etc. The result is the appraisal numbers are often coming in significantly lower than the Sales Prices and there is very little chance of a successful appeal. Now the sellers are blaming the appraiser for their loss! The appraiser seems to always be in someone's dog house!
The second issue is a little harder to understand. There is a growing inventory of bank owned property. It is unclear why this is happening. Under normal circumstances if a bank foreclosed on a property they would do everything they could to sell it as fast as possible. That makes good sense. Now they are foreclosing and in many cases doing nothing with them. This raises the fear that when they finally start selling them there will be a glut of under priced properties unloaded on the market at the same time, further depressing prices. Will that really happen? I don't know but somehow all of that bank owned property, known as “REO” will have to be dealt with sooner than later.