Home appraisals lag the rising market

Home sales and foreclosure listings are rising across the Northwest Arkansas region which has veteran appraisers working overtime. But despite the hectic pace, not all values are rising fast enough to keep pace with positive market trends in place.

Charles Hudson Sr., owner of Hudson Appraisals in Rogers, said the turn-around time for an appraisal is one to two weeks, and his crew is working overtime to keep that being any longer. He said the demand for appraisals is steady and mixed between conventional homebuyers and an uptick in activity in the foreclosure market.

Nicky Dou, a broker with the local franchise of Coldwell Banker, said recently she’s seen a few closings taking longer than they have in the past because there are so many more sales which have inspectors and appraisers requiring more time.

Agents sold 2,001 homes across the two counties between May 1 and July 31. Unit sales are up nearly 16% through the first seven months of this year, according to Paul Bynum, market analyst with MountData.com

At the same time, the number of foreclosure properties for sale continues to rise with 396 listings as of last week. Agents said then there had been 64 new listings in the past 10 days. Distressed property listings totaled 296 in June, rising from 249 in April and 222 in March.

Real estate professionals said a more active market – even with foreclosures – is another positive move for real estate values that may still be lagging in some areas.

VALUE COMPARISONS
Dou said she has seen a few deals this year where appraisals did not match the offer in hand.

“I have had to send comparable data that supported the sale to the appraisers. Some will look and make changes, and some will not,” Dou said.

She adds that some of the appraisers are coming from outside the area and do not know this market.

Hudson has appraised in the region for more than two decades and said values are mixed, although nearly all are up somewhat from the deep lows recorded a few years ago. He said values remain mixed, which is not uncommon given that the two-county region encompasses everything from new starter homes, to older established neighborhoods and exclusive executive-style homes – all of which have been impacted by foreclosures in recent years.

Hudson said appraisers have to look at historical sales data to draw market comparisons which can include distressed and non-distressed sales depending on the neighborhood.

“I have had some appraisals that were done in areas where there were 24 sales transactions to compare with, all of them were distressed. This property was not,” he said.

In other cases, Hudson said if there is an arm’s length comparable sale that isn’t distressed, that usually supports higher values. He said every neighborhood is different. Hudson said the new home market appraisals are standing firm in part because builders are not making concessions.

“We know building costs are going up and homebuilders have to pass those along, so it makes sense that new home prices are higher. There is also no real excess supply to hinder the price appreciation,” said Tom Reed, owner of Reed & Associates appraisers in Fayetteville.

He said that does not mean existing home prices will rise to the same degree or in concert with the new home market because there are other factors in play. Reed was not surprised to hear that some sellers have to had lower their prices when the property did not appraise for the buy offer in-hand. Again, he said appraisal data is backward looking and usually lags the present market, which at this time is moving higher.

J.P. Sexton, mortgage lender at Liberty Bank in Fayetteville, said when values are rising, it takes a while for the appraisals to catch up, especially on the heels of lean years. On the flip side, Sexton said when prices were going down a few years ago some of the homes still appraised higher because of the lag from the boom years.

“I have recently seen some buyers bring cash to the closing table when the home they wanted appraised $10,000 below the contract price. The seller lowered the price by $5,000 and the buyers put an additional $5,000 down to get the home they wanted,” Sexton said.

That was a case where the buyers understood the home’s upside potential and they had the means to work out a deal, he added.

EXISTING HOME SALES
Vicki Briolat, an agent with Crye-Leike in Bentonville, said she has held her breath on some recent appraisals, but so far she has not had one come in too low.

“I recently had a listing for a buyer using VA financing. VA uses their own appraisers and he had my seller fix a few small issues before he would complete the appraisal,” Briolat said.

She said prices are better for sellers of existing homes, especially if the property has been well-maintained. While there are more foreclosures on the market, Briolat said the number of listings remains low.

“I am nearly sold out, activity has been solid and we are selling what we get, nearly as fast as we get it,” Briolat said. “It’s a good problem to have but nearly everyone I know is looking for more listings.”

She said a seller can’t do anything about what has happened in the neighborhood – foreclosures and such. But things a seller can do to get top price for their home is get it ready, listen to the agent and price it right.

“I recently worked with a couple who wanted to sell but it took them four months to get the home ready. We waited to put the home on the market until they had made all the changes recommended, most of which was de-cluttering and replacing the large scale furniture with borrowed furniture from a relative. When we listed the home, we got two cash offers in the first 12 hours. We ended up with five offers and my sellers got what they wanted out of the deal,” Briolat said.