Coastside Appraisals Improving Yet Still Tentative in 2013
First of all, sorry for the delay in writing…it’s been quite a busy time.
I want to write about appraisals now since I’ve had a few interesting appraisal experiences this year. The appraisal articles have dwindled in the last couple of years. . .seems they are not headline worthy right now. With the market improving overall, there certainly have been fewer appraisal issues than 2010-2012. However, it is not time to take for granted that a satisfactory appraisal will sail through underwriting – especially in our market. As the given we all know, real estate is local and so are appraisals.
When you purchase a home, the contract will allow for an appraisal contingency. It is usually handled within the loan contingency but can be treated separately. The appraisal contingency is important. They are particularly important on the Coastside because of the variety in our housing inventory – it’s part of what makes the Coastside unique! Double-edged sword :). To make matters more complex here, this is the case whether it’s a rising or falling market.
Buyers and Sellers pay attention to this clause. An appraisal is prudent protection for the buyer. While sellers may like to see an offer without an appraisal contingency, they (i.e. their Realtor) will want to do their due diligence on a buyer who forgoes the appraisal contingency to make sure their cash funds are there. We have seen more cash buyers in the last year as the recovery progresses.
Successful purchase appraisals rely on a consistent sales history in the local market and recent sales similar to the property being purchased. Appraisers like to look at similar types of sales in the recent past. If they cannot find it, they move out to surrounding neighborhoods. That can be tricky for an appraiser unfamiliar with the Half Moon Bay Coastside.
When I look at the comparable sales in a Half Moon Bay area neighborhood, I can tell if the property will be an easy appraisal or a challenging one. That is, challenging for someone not familiar with our area. Some appraisers give more/less value for views, lot size, and location.
This year it has been helpful for me to make sure the appraiser has been doing Coastside appraisals consistently for the last several months. If they don’t have the local experience, I request another appraiser if possible. I’ve requested a more qualified local appraiser three times so far this year. The only lender who has not granted a new appraiser when I felt it was necessary, so far, is Chase. For our area, it has less to do with the appraiser’s qualifications as their local market knowledge.
These challenges happen at all price points. I requested a different appraiser for the $1.1Million price range but it was denied. I asked the loan officer if the buyer’s interest rate was so good that it was worth possible appraisal issues; she said no, so she changed the buyer’s loan program. The sale closed successfully. Another appraisal that could have been an issue was an $800K range in Half Moon Bay with very limited sales in the neighborhood. I brought all the comparables that I used to recommend the offer price to the appraisal, and the appraisal value came in at purchase price, to the buyer’s delight. Another example was in the $650K price range in El Granada that showed sold comparables not quite as high as this sale price, but on much smaller lot sizes. That one, too, appraised at purchase price value.
Bottom line is that with careful attention to thoughtful offer prices and the appraisal process, the outcome will be positive for both buyers and sellers.