Before you put your house on the market, or consider buying another home, you need to find out how much homes are selling for in today's market, so you can make your plans based on the most up-to-date information available --
I'm sure by now many of you have read the article in Sunday's Star Tribune about the new appraisal rules, and how they "killed" the sale of the large Rosemount home when an appraisal came in $215,000 less than the agreed sale price of $645,000. The new appraisal rules have no doubt created a stir in the industry at a time when home sales need a boost.
In May of this year, Fannie Mae and Freddie Mac instituted the Home Valuation Code of Conduct (HVCC) , which is a new set of rules that bans commission-paid loan production staff from selecting appraisers. Since loan brokers can no longer make contact with appraisers, they can no longer order the appraisals. Hence, many lenders are outsourcing the scheduling to appraisal management companies.
The whole premise of the HVCC was to prevent the inflation of appraisal numbers in order to get a sale completed (through pressure by commissioned loan staff), and to ultimately help prevent banks from loaning funds to borrowers for amounts that exceed the value of the proeprty.
This sounds like a nice plan in theory. In practice, it is creating headaches for many sellers. For example, since the appraisals are now being outsourced by appraisal management companies, many appraisals are being done by appraisers from outside of the market area who do not have market knowlege of the neighborhoods. In the example given in the STRIB article, the appraisal on the Rosemount house was done by an appraiser in Zimmerman. A second example in the article demonstrated comps used in a high-rent neighbhorhood.
Since the appraisal scheduling companies do not have relationships with appraisers who work specific market areas, appraisers who live far away are driving distances to conduct appraisals, and as a result, delays are common. Additionally, since many appraisers need to drive such distances between job sites, and since management companies are paying less for appraisals, fast and cheap appraisals are the result. Fast appraisals can lead to inaccuracies that significantly hamper the quality of the appraisal.
One of the ways we have been working on behalf of our sellers to try to combat the appraisal quality issue has been to meet the appraiser at the home at the time the appraisal is being done. We provide a list of comps to the appraiser to help support the market price for the area. Ultimately, it is the appraiser's decsion whether to use those comps or not, but it at least helps us provide local market information when an appraiser might be from outside of our market area.
Finally, the article left me with an unanswered, naagging question - how can the Rosemount sellers be assured that this house will appraise again, at the needed figure? The answer lies in limbo. Another failed appraisal will be seriously detrimental to the seller.
Buyers who are looking to take advantage of the $8,000 tax credit need to really start moving on home searches if they have any hopes of fulfilling this objective. Properties must be closed no later than November 30, 2009 in order to take advantage of the tax credit. When one takes into account the time it takes to get pre-approved for, search for, offer on, negotiate, inspect, and arrange financing and title work on a property, 125 days is not a lot of time.
If the buyer is looking in the $150,000 or lower price range, this market has become a seller's market and offers must be highly competitive in order to stand any chance of being accepted.
If a buyer wants to write an offer on a short sale, the timelines short sales require to complete are almost already at the point of being nearly impossible to get closed by November 30.
The clock is ticking.... if you know of someone who needs to get into a house before November 30, please have them contact us ASAP at 952-212-3597.
Data compiled from our local REALTOR Association...
The months supply of inventory for homes under $120,000 has dropped 61.5 percent in the last twelve months from 9.3 to 3.6—the lowest mark for that price range since 2005. Sales have almost quadrupled in that category in the last year while inventory of available homes has basically held flat. In sum, it is now officially a seller's market in that price range.
The upper price brackets look markedly different, however. North of $190,000 sales are still in decline compared to a year ago. And north of $500,000 the months supply of inventory available continues to grow.
Condominiums remain the only property type that has still seen a year-over-year drop in home sales, down 8.2 percent over the last twelve months. Sales of single-family detached properties are up 20.2 percent and townhomes are up 4.9 percent.
While July's numbers are still pending, June’s pending sales were the highest June showing since 2005 and the 12th consecutive month of year-over-year increases. With low mortgage rates and the $8,000 federal tax credit for first-time home buyers, the recent jump in sales has spilled over into the traditional market a bit.
The number of properties for sale at the end of June was 26,204, down 21.9 percent from this time last year. There are 7.3 months of supply available, down significantly from the mark of 10.6 seen at this time last year and trending back down towards a balanced market of 5- to 6-months of supply.
The numbers for Savage are consistent with these findings.
For our West Savage neighborhoods, active and pending sales are holding steady.There is a decrease in active inventory which can primarily be attributed to steady pending sales keeping inventory at bay.
West Savage is continuing to see a supply of short sales come on the market.Short sales differ greatly from foreclosures.Foreclosures are bank-owned homes where the bank is the seller and is offering no warranties on the property.Often times these homes need TLC and are offered at a discount. The list price is one the bank will accept, and like most other sellers’, this price may be open to negotiation.
Short sales, on the other hand, are properties where the seller still owns (and may or may not reside in) the property.However, the value of the home is less than the amount owed on the mortgage.In most cases the seller has stopped making mortgage payments and is anywhere from two to twelve months away from foreclosure.In short sale situations, the seller’s lender must approve any offer on the property, as the lender takes a financial hit on the loss with approval of the sale.Lenders will not negotiate a short sale until an offer has been received, hence, the initial list price of a short sale listing is not necessarily a price the bank would be willing to accept.Rather, it is a price used to generate an offer and begin negotiations.
Once an offer comes in, a two-three month wait for an approval or denial of the offer is normal.Lenders may attempt to prevent the seller from selling the property by offering discounted mortgage payments for a period of time.In cases where the seller will not agree to such programs, the bank may deny any offer from a prospective purchaser, which may put the seller in a “pickle”.Short sales may take anywhere from 2-4 months to complete from the time an offer is received, and are difficult transactions.Approximately 1 in 5 short sales close successfully.
Short sales in West Savage have not impacted any neighborhood less than another, and no income bracket has been spared.They are present in Hamilton Hills, Hamilton Hylands, Oak Hills, The Pointe, Woodhill, Summit Ponds and Heatherton Ridge.We continue to assist sellers with short sales to help them avoid foreclosure, and to help protect property values, as foreclosures drive down home prices and have an adverse impact on everyone who owns a home in the area.
For a complete list of our homes currently offered for sale, including short sales, click here.