A M. Appraisals Blog

You spent a lot of money fixing up your home, and realize that maybe you won't get every dollar back in value, but hopefully it will at least add some value, right? And then you find out that just down the road, one of the nicer homes in your subdivision just went into foreclosure. What does this mean for your property?

Well, there are several factors to take into consideration:

1. Sales Price

2. Quality & Condition

3. Number of similar sales in the area

For instance, just because a property goes into foreclosure, that does not necessarily mean that the bank is going to give it away. It could still sell for close to or at market price. If this is the case, then you have nothing to fear with regards to your property losing value from a low comp.

But what if the property does sell for an extremely low price? Perhaps it was due to it being a foreclosure, but could there have been other factors as well? Was the home in poor condition? Was it trashed by the previous owners? If so, this can be adjusted for on an appraisal in comparison to your home in good condition. Also, is the home physically similar to your property? Or does it have less heated area, not as many bathrooms, not as many upgraded finishes? If so, these differences can be adjusted for as well. Either way, the quality and condition of the home could be as much or more of a factor than the fact that the home sold in foreclosure.

Also, how many similar sales have there been in your subdivision? If there have been many similar sales that have sold as market sales, then these could easily be used as comparables on an appraisal, and there would be no need to use the foreclosed sales. If there are not enough market sales, then an adjustment could be made entitled "Conditions of Sale", where foreclosed sales could be adjusted for to bring them more in line with market sales in the area.

Although there is no perfect answer, the above techniques attempt to account for the differences between market sales and foreclosed sales. In this way, it is possible that recent foreclosures in your subdivision may have a very minimal (if none at all) affect on the overall value of your property.

As we listen to the news and talk with different people about the current status of the housing market, one of the few positive things that keeps coming up is that interest rates are at all time lows. So does that mean it is time to refinance?

You may have heard the interest rate rule that if you can get a 1.5 to 2 % lower rate than your existing rate, it would pay for you to go ahead and refinance (even after paying for closing costs) in the long run. Well, there is a lot of validity in that statement, especially given the current condition of the housing market in this country. While values appear to be still declining in most areas (although they may have bottomed out already in places as well), interest rates have been following a similar trend. This, of course, is good news, if you have a higher interest rate.

A few years ago, 6 or 7 % was considered a great rate - now, however, persons have been refinancing even with existing rates lower than these. 4.5 to 5% interest rate for 30 years - are you serious? (We recently even heard of a 3.1% 5 year ARM loan) If you have good credit and a decent DTI (debt to income) ratio, you might qualify for rates like this.  Granted, it is much harder to qualify for loans now, albeit land, home, or especially construction lonas, but if you do, the money you could save would well be worth any additional work it might take on your part to make it happen.

So is it time to refinance? If you qualify, and if you can save 1.5 to 2 percentage points or more, we suggest you seriously consider it. There is no telling how much longer rates will be this low, and it seems very unlikely that they could get much lower. But, of course, only time will tell...

Over the years, most people's income has increased with typical appreciation of values of real estate, goods, services, etc. A raise is relatively common for productive workers in the workplace. On the other hand, the fee for an appraisal has remained relatively stable, if not declining, over the course of the last few years. All of this has occured at the same time that requirements on the appraiser have increased.

Recently, FHA has made it clear that real estate appraisers should be compensated in a competitive way. This means that appraisal costs might seem to increase, but in reality they are just reflecting what the market demands for the services provided by appraisers. Transparency is becoming more common, with knowledge of average fees for different appraisal products per county (per state) becoming available to the public.

Unlike with the HVCC, where there are mixed feelings (some people don't like the limitations imposed on them by the government and others are thankful for the lack of pressure from lenders), most appraisers are thankful for the oversight of HUD on this matter, as it has helped to increase their fees, especially at a time when AMC's have begun taking some of if away. And when workers feel compensated and appreciated for their work, the quality and proficiency of it is bound to remain good, if not get better!

After the last couple of years, and the downward spiral of property values across the country, the 'million dollar question' on everyone's minds is: What is the market going to do tomorrow? Have property values recovered? Are they still declining? Are they now appreciating again?

While there is no way to know for sure, we can look at current trends to help in estimating future results. Market experts have 2 schools of thought on the current real estate market:

!. The market has bottomed out and is starting to rebound.

    They feel this way primarily due to the current amount of purchase activity for homes. This could be skewed, however, due to the current federal homebuyer rebate and low interest rates.

2. The market has settled slightly, but is going to decline more.

    This analysis, though discouraging, is viewed most likely when looking at the overall condition of the US economy and the so called 'quick fixes' put in place to stall a market depression. These experts feel that we haven't seen all the long term negative effects fully, and the worst is yet to come.

Which is really the case? As is always wise in this life, a balanced approach is usually the best choice. Perhaps the market has not bottomed out, however the current situation is stable at present. Since no one knows for sure, and 'hindsight is 20/20', it would be best to continue living now as if things will get worse, but not stress over what could have been, what is, or what will be.

The future will take care of itself. We need to use our resources wisely and take advantage of the current market situation, including historically low interest rates and available tax rebates. A real estate appraisal may be a step you need to take in order to see these realities now present!

Have you noticed the market lately? If you believe what you hear on the news, then we are going to have to wait a long time for the market to recover.

How is this affecting our local market in SC, and the midlands? An appraisal on your property may be the best indication of current market trends. We would be happy to help you with this, and are here to assist you with all your financial needs, including listing or selling your home.

Ashley Martin, Owner