In this article published in the New York Times it discusses the issues that many high end buyer and sellers are facing. Although there has been a pick up in million-dollar-plus-market for homes there has been an unexpected issue. Appraisers are called in when the deal is going to be financed. The problem is that there is a lack of comparable properties to these high end deals and the appraisal values are coming in well under the asking price. There is a difficulty arising here with the sales price. If a lender uses a certain ratio based on appraised value then that typically leaves a large gap between asking price and funds available to spend. The question I pose is what should the seller do? If I were a seller my asking price would be derived from my opinion but mostly my real estate agent who is responsible to price my property accordingly. When I hear an offer significantly off from my asking price I have two options. Wait for a cash buyer. Which would be few and far in between due to the very low interest rates that many people are choosing to take. Or I could take the deal with the understanding that every person financing will be coming in with similar offers due to the appraisers. However, I could wait until more properties have been sold that are comparable so my appraisal could be more accurate. Either option is filled with pros and cons and it would take an immense amount of time and consideration to determine what is right.
http://www.nytimes.com/2013/01/27/realestate/mortgages-appraising-high-end-homes.html?ref=todayspaper
3 comments:
Interesting article. I believe this appraisal problem will be naturally addressed as the housing market continues to recover. Housing prices have already stabilized and are rising, admittedly from rock-bottom, and I believe as prices continue to rise more people with million dollar homes will be willing to put them up for sale. According to CNBC.com, there are currently only 1.82 million homes for sale, which is a small amount compared to historical standards. My belief is that in general people who own million dollar homes are not in dire enough need for cash for them to have to sell their house at any given moment. Therefore, many of these individuals who are thinking about selling their homes are probably waiting for prices to recover before they put their homes on the market. Therefore, if the housing rebound continues this appraisal issue may sort itself out.
With the economy growing and the housing market seemingly getting better this problem should resolve itself in the next few years but inreality housing prices will probably never get back to the point to where they were because people overvalued homes for a long time and banks are not giving out loans quite as easily meaning mortgages are more expensive with higher interest rates
"Either option is filled with pros and cons and it would take an immense amount of time and consideration to determine what is right."
My family recently sold our house and moved from Columbus to Chicago, and while we weren't exactly dealing with a million dollar house, we still experienced this problem. I think the answer for any individual seller is simply how fast and how much money do they need? As Viny pointed out, when dealing with million dollar home owners cash may not be the biggest issue, so many may simply be waiting for the right price.
Post a Comment