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Bill Cobb

The Reason For Some Greater Baton Rouge Low Appraisals?

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Real Estate Appraiser with Accurate Valuations Group, LLC LA St Certified 851

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April 05, 2011 12:15 AM

http://www.batonrougerealestatetrends.net/ - Are Greater Baton Rouge Home Sales Stalling In The Under$140K Range? This is a post below I made to the Baton Rouge Real Estate Buzz Facebook Page Group on April 4,2011.

I'm noticing a trend in the $100K to $140K range where home sales have slowed, if not stalled. I'm reading aboutmortgages drying up for some. I'm looking at a 1004MC or Market Conditions Form right now in 70810 Area 53 where12 months ago there were 17 sales and 2 months supply and in First Quarter 2011 only 1 sale in current 3 monthquarter and 49 month supply. Of course, Baton Rouge home sales aren't totally stalled for all price ranges, but for theunder $140K range, there certainly has been a slowdown and increase in supply. Here's the recent examples below.

This 1004MC or Market Conditions Report Based On Sub-Market Solds and Listings For an overbuilt home inHermitage Subdivision, but using 1,200sf to 2300sf lowered price homes as comps in Area 53. From 17 sales12 months ago to only 1 in current 3 months. Months supply of inventory 12 months ago was 21 months andcurrently it's 48 months. Median sales price appeared to remain stable. It actually increased, BUT trend is not calledjust based on 1 sale.

SAME TREND IN DENHAM SPRINGS FOR 2 HOMES. I saw this exact same trend in Denham Springs last week. Acouple purchased a home for $141K in 2007, surely a Post Katrina high price, and it appraised in low $130s in 2011due to expected market correction. There was going to be a correction! 1004MC or Market Conditions Datashowed 8 sales and 9 month supply 12 months ago and only 2 sales and 36 month supply in current 3 month period.In this case, median sales prices had declined, corrected.

This 1004MC Based On Sub-Market Solds and Listings For a 1,500sf 40 yr old home in South WoodcrestSubdivision. From 9 sales 12 months ago to only 1 in current 3 months for past 2 quarters. Months supply ofinventory 12 months ago was only 4 months and currently it's 45 months. Median Sales Price was $128,450 12months ago and is now $124,125, a dip of -3.4%. Also, the Median Sold Days On The Market increased from76 days 12 months ago to 191 in Q1 2011 .

This 1004MC or Market Conditions Report Based On Sub-Market Solds and Listings For a 1,150sf 40 yr oldhome in Sara Estate Subdivision. From 9 sales 12 months ago to only 1 in current 3 months for past 2 quarters.Months supply of inventory 12 months ago was only 4 months and currently it's 45 months. Median sales priceappeared to remain stable.

The Positive In The Market! I do know there is a lot of positive chatter from local Real Estate Agents on FB on theuptick in home buyer interest....and that's a positive for the market.

PART OF THE REASON FOR "LOWAPPRAISALS". As home appraisers, the BigBanks are really concerned about CollateralRisk and want to know much more about themarkets they lend in from the home appraisal.This is why today's home appraiser works a couple of hours longer on each report to deliver all of this extra data, tobetter understand the markets they operate in and apply market based adjustments, whether those adjustmentssupport a purchase agreement or not. Stats like I'm reporting here aren't obvious on the surface when it comes topricing a home for a listing BUT are made more transparent at appraisal time. Such stats as 45 months supply,declining median sales prices and average days on the market of 191 days do influence the final outcome on anappraisal and helps the lender make the decision as to if they are going to take the risk to lend in a market.Underwriters can choose to "cut" the appraised value.

In my opinion, sometimes a "Low Appraisal" isn't really a low appraisal but more of a reflection on the reality in thatmarket at that time period. And, that period of time could be months and months after that Agent's sign went into the

ground in front of that home. Markets Change! After all, if the market indicators above in the 1004MC were known toonly the Appraiser and not known by the Agent marketing the home, then can you now see how and why appraisersare armed with more knowledge of market interaction? And, in the case where median sales prices were declining,can you see how that if this is not known by listing agents the trouble this causes at appraisal time? This is the newerdepth of market analysis we appraisers are seeing in the markets we operate in AND the market analysis theaverage real estate agent is not seeing in the same market. Can you understand now why Fannie Mae, Freddie Mac,FHA, RD, VA and Banks want appraisers looking at these numbers more closely? I as a home appraiser certainlycan.

Sometimes low appraisals happen because the overpriced listing was based on what the seller wanted versuspricing that home based on market support. Sometimes low appraisals happen because the home wasn't properlymeasured and may be smaller than stated. Sometimes low appraisals happen because excessive seller paidconcessions were not deducted from the comps used by Agent to establish the listing price. Fannie Mae instructsappraisers to deduct excessive seller paid concessions and expects Agents to do the same at listing time. And, whenthe comps or solds used in the appraisal state seller paid concessions of $6,000 to $8,000 to $10,000 to $12,000,then those excessive concessions will be deducted from those comps. If typical is $3,000, then in the exampleabove, -$3000, $-5000, -$7,000 and -$9,000 will be deducted to bring these comps back down to market normalcy! Fannie Mae, FHA and lenders know that when there is no "skin-in-the-game" or downpayment, they are more likelyto get that home back. And, there are some P.A.'s written to utilize excessive seller paid concessions to get peopleinto housing. It's as if the regulations are asking the appraisers to help correct this situation in the market.

A Decrease In Mortgage Lending In These Price Ranges? Is there a decrease in mortgage lending in these priceranges or just harder to qualify for a mortgage loan....or both?

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