Athens GA Properties, Athens Georgia Homes, and Athens Real Estate

“Approximately 25 percent of real estate practitioners say low appraisals have broken up deals, according to the NATIONAL ASSOCIATION OF REALTORS®.” Headlines today that I don’t agree with entirely.  From my experience working and talking with my fellow real estate professionals I have found in certain markets that this number is much, much higher.  In Athens for example where foreclosure resales only make up 15 percent of housing supply, appraisal issues are not much of a factor or concern.  In Winder, Hoschton, Lawrenceville, Braselton and most of metro Atlanta appraisal issues are tearing deals apart at close to a 35-45 percent pace by one recent poll.

In the past foreclosed properties typically were not included in a comparable sales analysis, yet today they account for about 40 percent of home sales (depending on your market) making it impossible for appraisers to value properties “not” in the foreclosure process or current bank owned properties relisted for sale.

This is compounded by new appraisal guidelines that require appraisers to consider “active listings” in determining “fair market value” to which most people would laugh.  I had this conversation with an appraiser recently.  We had a house that was selling (non-distressed) in Winder that was already priced roughly $5000-$7000 below traditional sold comps.

The appraiser could not understand that this was “not a distressed” situation due to the contract price being so low.  It was seller motivation.  He then beat us up even “lower” because an active listing across the street was “listed” for $5000 below our already low contract price.  This listing across the street was a foreclosure purchased by an investor and he tagged it with an even lower than market price to get it resold.  He could do that because he bought the foreclosure for next to nothing!

The appraiser “had to consider this as much as he would another sold comparable” based upon what the buyer’s lender (on my property) wanted to see in his appraisal of the area. These new appraisal guidelines therefore have the capacity of tearing down prices that much more and blowing contracts.

Additionally, in recent months we have added new banking guidelines that require lenders to order appraisals through appraisal management companies has meant more appraisers are looking at properties without knowledge of the local market are making valuations.

As reported by the NAR, a study of 20 years of home sales by Harvard University’s Joint Center for Housing Studies shows that homes closer than 100 yards to a foreclosure lose about 1 percent in value at point of sale.  How about multiple foreclosures within 100 yards of the same property? No one did that study.

Foreclosures taking housing prices down further in 2010

Based upon all these reasons, you can see why some researchers are forecasting that home prices will keep falling in 2010.  I have seen reports of predictions of anywhere from a 10 to an 11 percent decline with the NAR predicting an increase in prices by 3 percent in 2010!  Chief NAR economists make the point,  “The headwind we face is rising mortgage interest rates,” says NAR Chief Economist Yun, “but the compensating factors will be the home buyers tax credit in the first half of the year and increased job creation in the second half.”

Okay,  I can buy that a little.  The tax credit will help for about four months.  After that and maybe before that if rates continue to climb it may stymie prices from rising during this time frame, but you might have a larger problem.  “Shadow Inventory” I believe they call it, and yes it is scary.  Shadow inventory is a name for the potential 2 million or more bankowned properties that were taken in foreclosure that have not seen the light of  the resale market yet.  It has been rumored that banks are holding back tons of inventory until the New Year dawns.

Well now it has dawned.  Let’s see what happens.