New Wrinkle for Sales - Appraisals Too Low

it's not prices, it's the new HVCC rules, which mean that the appraiser on an apartment is essentially somebody from Upstate who doesn't know Park Avenue from Prospect Heights.

When we just bought we had to reappraise our condo, which we are keeping, and the appraiser did a "drive-by" which means they didn't even walk in the door -- how can they appraise an apartment without looking at the kitchen?

It's a nationwide problem, and the industry is moving to correct it.

ali r.
{downtown broker}

Special Interests are working against Mortgage reform this is part of it. These stories are really directed at our law-makers. They also help to get public support. Truth be told No appraisal is too high for the real estate industry.

> it's not prices, it's the new HVCC rules

You're missing what I'm saying. I don't mean this as the appraisals are right...

I just mean that this is going to encumber transactions, and might have an overall effect of pushing down (if sellers are having an even harder time selling, and have to relist).

Funny how brokers never complained about "drive-by appraisals" when prices were going up.

i just had a drive by appraisal as well...first time for me in 5 years

Maybe the appraisers are right. Manhattan properties are too expensive in terms of incomes and rents.

If it shouldn't be more expensive to own than to rent, why should an appraiser give an appraisal that says it is?

The arguments are that real estate is too high, and appraisals are too low. Both cannot be true.

Yes they can.

Financing makes the price. If the banks are being more conservative with appraisals then apartments ARE worth less. The banks are not in conflict with value...they determine value by their willingness or unwillingness to lend.

Easy lending is why apartments have doubled since 2000 without rents moving. It was simply a change in the banks willingness to lend. Well, not just that, the same leverage drove up earnings per Wall St employee.

Advocates of housing affordability should welcome this development.

once again you have no clue what your talking about Rhino. Rents have increased at least 25% since 2000.

Rents have not increased 25% since 2000. Either way, stupid, the point is easy lending allowed values to lap rents several times. If banks want to be more conservative, they define the direction of value, they are not an opposer to reality. They make reality. This is above your head, I know.

Alpo, you stupid dog, no one here appreciates your posts. Find someplace else.

once again, your the idiot. In 2006 alone, rents increased 20%. Add that to the 5% per year for 2000-2005, and rents are up nearly 50% since 2000:

In the last year, rents for market-rate apartments in Manhattan have jumped as much as 20 percent, or nearly three times the standard 5 to 7 percent increases seen each year in the last 15 years, said Fritz Frigan, the director of sales and leasing for Halstead Property. “Rents heated up so much that people said, ‘At this level, we’re better off buying,’ ” Mr. Frigan said.

http://www.nytimes.com/2007/02/25/realestate/25cov.html

Nice article from 2007. Learn the math of compounding dog boy. Even if they were up 50% to 2007 from 200, they are down 25% vs. peak. That equates to 11% since 2000. Nor do I beleive that 50% from 2000 to 2007 is the right figure. You are so sad and stupid.

Back in your cage, dog -IGNORE-. Even when you are debating the difference between 10% and zero over ten years (poorly), you are missing the main point.

so now you've gone to saying that rents are flat to saying they arer up 11%? And rents are not down 25% from the peak.

Rent inflation has been minimal. Value inflation has been incredible. Easy credit is the answer, on the demand side on financial incomes and inflated appraisals. We are witnesses the withdrawal of the rocket up the ass of values, and some are complaining because they dont understand its role in the rise in the first place.

> once again you have no clue what your talking about Rhino.

Did alpo REALLY just say that?

This is the genius who said there was no decline just a few months ago. And he did it in all caps!

"Nice article from 2007. Learn the math of compounding dog boy. Even if they were up 50% to 2007 from 200, they are down 25% vs. peak. That equates to 11% since 2000. Nor do I beleive that 50% from 2000 to 2007 is the right figure. You are so sad and stupid. "

ROTFL.

I don't know why the dog boy keeps coming back for more...

Pretty sure I called this a few months back. When the banks want to lend, they come up with any excuse possible, and if the appraisers they are using don't come up with the sales prices, they take them off their list and the appraiser gets no business. On the way down, when banks don't want to lend, they look for appraisers to be tough, and if they aren't tough, they take their business away. One reason you're going to see low appraisals is it's a "funny" way of forcing people to put down more equity: the banks know that as long as the appraisal doesn't wall TOO far below sales price, many buyers are "invested" enough in finishing the deal that they will come up with the extra cash.

For appraisers in 2009 doing "drive-bys" - does this mean they just go to Google Earth and take a look at the building online?
If front porch is correct "it's not prices, it's the new HVCC rules, which mean that the appraiser on an apartment is essentially somebody from Upstate who doesn't know Park Avenue from Prospect Heights."
These drive bys must mean that some appraiser in Rye gets the job, goes to Google Earth, checks out the property, finds some comps and spews out a random number.
Seems like a good idea. Another excellent policy/standard practice for the real estate industry.

http://fanniemae.articulate-online.com/p/7778703690/DocumentViewRouter.ashx?Cust=77787&DocumentID=ac2dbae4-013f-4be2-b6bc-036190988cd7&Popped=True&InitialPage=player.html

Just had the appraisal numbers come back from our refi. 20% down from peak. 25% up from our purchase price ('06). The appraiser was from NYC and we are responsible for appraisal fee ($1500). No real pressure from our end to
get a particular number as we have 6 more years left on our ARM. Lender is now asking for 70% LTV instead of 80% LTV.

I'm not seeing where the problem is - wouldn't everyone try to get a mtge contingency clause in their K now? So why worry about where the appraisal comes in. If it's lower than K #, back to the negotiating table.

This is semantics. They want less risk on there books, period: more owner equity, more margin of safety in loan to value. Its interesting because the people crying about this are basically demonstrating that they don't understand the role that easy financing playing in the move up. This is not new, this is back to normal.

You two really should have your own episode of Love Boat.

Our appraisal came in at $650/sf, even though there is a unit under contract for $775/sf (closed last week) and another that sold for $750/sf a month ago. The two units in our building are on lower floors and need new kitchens and baths. (Ours is fully renovated.) Although the appraisal was very conservative, it didn't impact us since it was a refi at < 50% LTV.

i think there are pros and cons of having local specialists do the appraisal.

while I see the point that someone from upstate cannot tell 70 and park ave from 90 and park ave, there is always the concern that appraisals being restricted to the small clique of manhattan based appraisers will lead to group think.

the real estate industry in manhattan is a bit incestuous, with brokers owning multiple properties (particularly in harlem), and others going into property development or even into journalism (who do you think writes NYT articles?). it might be a good idea to have someone from the outside come by and shake up this clique and tell them that outside in, there is indeed no difference in price between 70's and 90's on park, and you guys had better suck it up.

Agreed eric. I feel this fact really constitutes a conflict of interest. I posted here that the broker that has the most properties in south Harlem happens to be selling 2 of his brownstones. He prices very, very high. It seems to me he prefers to wait rather than to sell.

The broker prefers to wait? Maybe with control of unique product that is the optimal move for the seller (s).

Broker said he is in a comfortable enough situation to wait. Still, he has 2 properties for over 2m in the market and most of his listings failed to sell because the prices are too high. The harlem brownstone mkt below 125th street is quite small, so between his properties and his listings, they comprise a good % of the market. Rhino, could you elaborate? Tks.

Mimi, I guess I mean buyer beware and seller beware and alls fair in love and war. If the broker has that market cornered both in terms of actual ownership and/or their represented properties...Then if they believe it is the best course of action for them to hold out for a higher price, that is their perogative. I do not beleive its a conflict of interest. Their risk is the converse. If they are greedy and wrong, they have a concentrated ownership and agency interest and will suffer the consequences.

"These drive bys must mean that some appraiser in Rye gets the job, goes to Google Earth, checks out the property, finds some comps and spews out a random number."

If that is how appraisers are working today, then we don't need them. Fire all the appraisers (except Jon Miller) and replace them all with Zillow Zestimates.