Author Archives: Lane Bailey

The Appraisal Came Back Low… aaarrgghh!!!

Wednesday, 27 March 2013 15:48

Written by Lane Bailey

1 Comment

Commonly heard, especially from sellers right now…

Let’s get a couple of things out of the way.

Back during the “boom”, it was almost unheard of for an appraisal to come back too low. The banks wanted them high, and the appraisers were getting paid by the banks. The thought was “real estate will always go up, so if the value is a little out of line, it’s OK”.
Around 2007/2008, that stopped. There were a lot of big changes in the appraisal world…
Appraisers NOW are all but forced to be VERY conservative.
Appraisals are based on “comps” sold within the last 6 months… sometimes 12 months.

1939 United States Appraisers Stores Building, 7300 Wingate, Houston, Texas 1205201547BW (Photo credit: Patrick Feller)

So, where we find ourselves in the current real estate climate is with price appreciation happening, most noticeably at the entry level end of the market. Homes are OFTEN drawing multiple offers and selling over listing price.

As a byproduct, values are outstripping appraisals. It isn’t always that the prices are out of line with other homes in the neighborhood… it is often because the appraisal process almost demands that appraisers work with information that is out of date.

On average, after a buyer and seller agree on a price, it may take from 30-60 days for the sale to close. After that, it may take another 30-60 days for the sale to be recorded with the county. The local MLSs are a bit faster, generally having the sale information within a week or so of closing.

So, the Appraiser is working with sale prices that reflect where the market was anywhere from 1½ to 4 months ago… at best. And in the market we are in, there has been about a 10% increase in pricing, dependent on location, price segment, etc. But much, if not most of that appreciate has been more recent than the 6 months an Appraiser is looking at.

The next issue that we run into relates to condition. Many of the properties that sold last year, or the year before that were in pretty rough shape. Much of the foreclosure and short sale inventory has been worked through, but a year, and even 6 months ago, it accounted for a large chunk of the sales. Now, with constrained inventories, that isn’t the case.

Housing (Photo credit: james.thompson)

Appraisers DO adjust values based on condition… but the problem is that often the adjustments are based on a limited amount of information available in an MLS listing for a bank-owned property. Sorry, but many of the “REO Agents” left minimal information for the appraiser to work from. It wasn’t uncommon to see a bank-owned listing with 4 pictures, and NO details about condition of the property.

Subsequently, the Appraiser might not know that the house that sold a year ago in the subdivision for $75,000 less than the house you are dealing with also happened to need $50,000 in work to bring it up to where it is now. And his adjustment for that house might have only been $10,000…

The result is that we see neighborhoods with homes that sold for $100,000 last year, with homes that could (and do) sell for $175,000 this year. Seems like a HUGE increase in value, but the reality is that the $100,000 house needed a tremendous amount of work to get it up to where the current houses are. Coupled with the reduced inventory and increasing prices… the current price is NOT out of line with reality.

But then…

The appraisal hit. And it hits HARD.

The buyer either freaks out and thinks that he wants a MASSIVE price cut because of the low appraisal, or starts freaking out that there is no way they can buy the house.

The seller either freaks out because he has to take that much more of a loss, or becomes despondent because he doesn’t think he’ll ever be able to sell his house.

Nobody wants to return anybody’s call…

Solutions…

AP of Large Residence under construction for use in an appraisal article (Photo credit: Wikipedia)

Actually, there are some things that can be done…

Buyers – You have to realize that the appraisal is an opinion of value, often based on out of date information. It is NOT the Appraiser’s fault that it is low… the Appraiser HAS to work within very specific guidelines.
Sellers – Same thing.
Both – Don’t yell at your agent. We aren’t picking the appraisers. Neither is your Mortgage person. But, we WILL try to help.
Sellers – One of the best ways to start is to buy (yes, spending money) an appraisal PRIOR to listing your home for sale. Forewarned is forearmed. It is better to know well in advance that there could be a problem than to get slapped by a shocker appraisal just when you think you are on Easy St.
Agents – Do your homework. Is the CMA for the Seller (or the Buyer) “real” or is it manufactured just to tell them what they wanted to hear? If it is based in reality, give the Appraiser the comps you used. You can NOT tell them what to value the house at, but you can help them get to where you are.
Sellers & Seller’s Agent – If you get a pre-listing appraisal, talk with the Appraiser about helping to fight the low one. They speak the same language and might have an easier time working everything out.

There is one other tidbit. If the appraisal is done for an FHA loan, it sticks with the house for 90 days… that mean ANY subsequent FHA loan from another buyer for the next 3 months will use the same appraisal. And if you think it is out of whack now, think how out of whack it will be in 3 months…

The bottom line is…

Don’t freak out. Work with the professionals that you hired and see if they can get everything worked out.

Suwanee, GA, Market Report, February, 2013

Monday, 25 March 2013 11:13

Written by Lane Bailey

1 Comment

Market stats for Suwanee, GA, February, 2013 indicate that there were 315 properties on the market (down from 332 last month). Overall, there was about a 4.8 month supply of properties (up from 4.7 last month). February had 66 sales. Compared to February, 2012 (64), this year was up, but inventory was down compared to 2012 (433). There were 50 sales last month, so this month was up a good bit. There is generally a dip in January, so the bump in sales isn’t really a shocker.

In the Under $200k arena, there were 64 listings in Suwanee, GA, with about a 2.7 month supply (compared to 4.3 months supply last year). This February’s sales were 24 (30 last year, 15 last month). It used to be a county leader, though, for now it is moving back to one of the best price/locale segments again. The next level up is coming up fast, though. Sales were likely limited by constricted inventory. Last year at this time, there were 133 listings.

Between $200k and $400k, there were 167 listings for sale (201 last year, 148 last month), and 5.5 months of supply. Sales in February, 2013 were 32 (27 in January), compared with 27 for the same period in 2012. Sales have been consistent for the last few months, but have fallen off somewhat for the last five months. I’d like to see it get up to around 40 sales or so for the next couple of months. This shouldn’t be a “peaky” market/price segment. Unlike most of the county, this is the largest price segment in the area, and its direction plays a major part in how the area looks. Make no mistake, this is still pretty much in Seller’s Market territory.

From $400k to $600k, there were 44 homes on the market. The absorption rate was at 6.0 months (4.7 in January). There were 6 sales in February (5 last month)… flat from 5 last year at this time. Looking at the three month average, there were 22 sales this year and 15 for the same period last year. This segment has become dramatically stronger in the last couple of months.

In the $600k to $800k arena, there are 18 listings, with about a 5.4 month supply. Sales at this level are not consistent, but there was 4 sales this month (3 last month). Looking at one month makes the numbers jump around. For the last three months, sales were 10… For the same time last year, the sales were 3. With the huge decrease in listings over the last couple of months, I was looking for this to become one of the strongest $600k-$800k area in the county. It is fairly strong right now… we’ll have to see if it holds.

The range from $800k to $1m, there are 7 homes listed and 21 months of inventory on the market. There were only 4 sales at this price level in 2011. There were 7 in 2012. This is a tough segment to try to sell in right now, but if inventory stays low, it won’t be quite as rough. But there still needs to be some more sales activity. There was 1 sale each in March, July, August, September, October, November and December last year.

In Suwanee, GA, Above $1m, there are 15 properties listed. The current absorption rate indicated about 45 months of inventory, but because of the smaller numbers of sales, this could be significantly impacted by just a couple of sales. In this segment, we should be seeing reduced inventories… There were 24 homes listed in this segment at this time last year. There were 0 sales in February, but 1 in the Dec-Feb time frame, 3 the year before.

Suwanee, GA is a suburb of Atlanta in Gwinnett, Forsyth and (just a little bit) in Fulton Counties. The population is 2000 was 8,725, but that only included the area inside the city limits, and it had seen tremendous growth since that census. Money Magazine rated Suwanee in the “Top 10 Best Places to Live” in 2007, and it is one of the wealthiest parts of Georgia. Recently, the City of Suwanee has revamped their old town, adding a large park with a bandshell, condos, town homes and small businesses. It is also home to North Gwinnett High School, Peachtree Ridge and Collins Hill. I have a page dedicated to Suwanee Market Data.

Atlanta Metro Zillow Home Value Index

Atlanta Metro Home Values – Interactive chart

Home Price Appreciation by State

Friday, 22 March 2013 12:20

Written by Lane Bailey

1 Comment

Last week I posted an infographic from Active Rain saying that Real Estate is Back… Here is another one from 29doors that makes it look like in Georgia, it isn’t so much. But, looking at the market reports for Gwinnett, as well as Case-Schiller numbers for the Atlanta statistical area, prices look to be up year over year by more than 9%. That tells me that there are some places in Georgia that are still pretty slammed. What do you think?

Lilburn, GA Market Report, January 2013

Thursday, 21 March 2013 11:31

Written by Lane Bailey

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Market stats for Lilburn, GA, January, 2013, indicate that there were 193 properties on the market, down 24 from last month. Overall, there was about an 4.0 month supply of properties and 45 properties that closed (sold) in January. It was a slight decrease from last year’s sales (46) and a decrease from December (50 sales). The Absorption Rate notched down slightly. Lilburn had been among the weakest of Gwinnett County, GA, cities I track. But, at 3.97 months of inventory, it is strong now. Six months is considered balanced, lower is a seller’s market and higher is a buyer’s market. And it is one of a very few that got better in January.

In the sub-$200k arena, there were 128 listings, with about an 3.4 month supply with 36 sales. This represents most of the sales in the market area. Sales were down a little from last month (38), and down from last year (46). While the Absorption Rate isn’t as low as many other areas, sales are strong, and I’m think we are in a comeback for Lilburn. At 3.43 months of inventory, with a few months of stats getting better, we’re there.

Between $200k and $400k, there are 56 listings for sale, and about 5.3 months of supply. This segment had been quite weak for months, and had stalled a little, but came back with a vengeance… only to stall a bit again. There were 9 sales compared to 11 last month and 0 last year. Lilburn has never been seen as a luxury market. The decrease in listings has really helped. I’m still not as confident about this portion of the Lilburn market coming back quite yet… It is strengthening, just not as consistently as I’d like. July month was quite strong. April was strong… At least we are slightly in Seller’s Market territory.

From $400k to $600k, there are just 6 homes on the market. The absorption rate is 9.0 months. There were 0 sales in January. Poised for a comeback, but an increase in listings and weak sales don’t give the right ingredients for that to happen. To start with, we can’t have 7 month blank spots in sales (none from Aug11 through Feb12). If we can keep up a sale each month on average, this one will be back. Right now, low listings numbers give the appearance of strong activity.

From $600k to $800k, $800k to $1M and Above $1M, there are 3 listings (combined), but too few sales to have any sort of reliable number of months of inventory. March posted the first sale since August, 2010. It was in the $600-$800k range. One of the listings is above $1M and one between $800k and $1M, and there is no market activity in the last 12 months for those ranges…

Lilburn is in Gwinnett County, GA, just outside of Atlanta. As of the 2000 Census, there were 11,307 people in Lilburn, but that is only including people in the city limits, and there has been a lot of growth since 2000 in Gwinnett County. It was incorporated in 1910. Lilburn is home to Parkview High School, and also has students in the Brookwood, Berkmar and Meadowcreek clusters. It is also home to Killian Hill Christian School, Providence Chrisian Academy, St. John Neumann Catholic School and Parkview Christian School. Possibly the most famous resident of Lilburn is General Beauregard Lee, a groundhog with a better winter prediction record that Puxatawnee Phil up in PA. Dominique Wilkins, formerly of the Atlanta Hawks also lives in Lilburn.

Atlanta Metro Zillow Home Value Index

Atlanta Metro Home Values – Interactive chart

I have a page dedicated to Lilburn Market Data.

Norcross, GA, Market Report, January 2013

Wednesday, 20 March 2013 10:37

Written by Lane Bailey

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Market stats for Norcross GA, January, 2013 indicate that there were 138 properties on the market, up 8 from last month. Overall, there is about a 3.3 month supply of properties. The last year has been fairy strong… it hasn’t slowed much, if at all. January saw 36 sales, on par compared to the 36 for December, and down a little compared to the 40 for January last year.

In the sub-$200k arena, there were 76 listings, with about 2.6 month supply. Sales are up from last month and down from a year ago in this segment, which is the main driver of sales in this area (28 v 22 in Dec12 & 33 Jan12). For the last twenty-two months, the AR has been tilted in favor of sellers. This still looks like one of the strongest price/area segment in Gwinnett County, GA. At well under a 3 month A/R, this is VERY strong for sellers.

Between $200k and $400k, there were 41 listings for sale, and about 3.6 months of supply. This segment had been weakening for the last few months. But, the 8 sales was up from last year’s 6 sales, but was a little below last month’s 11 sales. Even though it isn’t as gangbusters as some of the other areas, it is certainly better than the 28 months of inventory we had in December, 2010. I’m was waiting for this segment to stop bouncing around so much. It does seem to be closer to finding its feet, though.

From $400k to $600k, there were 19 homes on the market. The Absorption Rate is around 9.5 months. The AR had been fairly steady all summer, then shot WAY up in September/October. January’s 0 sales were flat from the 3 last month and from last year’s 1 sale. This had actually been a pretty good area for homes in this price range to sell… The good news is that it only takes a few sales to put it back in a balanced range long term. In June we were at just 5.1 months of inventory and three months ago it was 42 months…

In the $600k to $800k arena, there was 1 listings on the market. The Absorption Rate is at 6.0 months of inventory… but with only 4 sales in 2010 and 4 sales in 2011, obviously it is easy to bump one way or the other. One reason for the strong looking Absorption Rate last month was that there were so few listings. February had 1 sale. The were 0 sales for Jan13, 0 for Dec12 and 0 for Jan12.

The range from $800k to $1m, there was 0 home listed on the market and 0 sales in December. There were no sales last year. Unfortunately there isn’t enough data for a good A/R number.

Above $1m, there was 1 property listed. But because of the smaller numbers of sales, the absorption rate could be significantly impacted by just a couple of sales. There is simply not enough activity for an A/R figure. The last sale was January 2011.

Norcross, GA is a suburb of Atlanta in Gwinnett County. The population is 2000 was 8,410 but that only included the area inside the city limits, and it has seen tremendous growth since that census. The City of Norcross revamped their old town a long time ago, and it has served as a model for other towns in the area. It is also home to Meadow Creek and Norcross High Schools. One of the things that Norcross is known for locally is the beautiful older homes in the downtown area. They have maintained their historic flair quite successfully.

I have a page dedicated to Norcross Market Data.