Appraised lower

If you signed a contract 15 months ago, odds are you are down more than 15%. Walk? No, run away, if you can get your deposit back.

negative time value - I wrote about almost a year ago in DEC 2008 once I got wind that Manhattan was deemed a declining market

http://www.urbandigs.com/2008/12/chasing_a_moving_target.html

2) APPRAISALS - NEGATIVE TIME VALUE - something that very few are discussing. Let us wake up the reality that the market has eroded and that the significant erosion in prices has not yet filtered through to closed sales. In comes 'negative time value' from the appraisal side. Now, when you do comps analysis on that property you are considering bidding for, you have to review comps from the past 6-8 months, which means the deal was signed into contract between 8-11 months ago or so. It's only when the deal closes that the purchase price is recorded as a matter of public record; and then used as a comp. Think about what will happen when NOV & DEC sales get recorded in JAN & FEB of next year! These fresh comps, that reflect the erosion I have been describing recently, will set the new hallmark for analysis!

if your contract is contingent upon financing and you cant get financing for the deal, then you should be able to walk without loss to deposit, no? Ask your atty?

I would try to renegotiate down first, as you obviously liked the property, and then threaten to walk if you dont get something workable. or you can pony up the difference.

Sorry, I should of said it was signed about a month ago. They added 1% depreciation per month since the signing.

And yes there is a mortgage contingency. I have a feeling that the owner is trying to keep to deposit. Just a gut feeling.

>>I have a feeling that the owner is trying to keep to deposit. Just a gut feeling.<<

Well, tough noogies. He can't. Because you've got a mortgage contin and appraisal is 15% lower than agreed price you can walk or try to renegotiate. If you choose to walk you get back your deposit regardless of what the delusional seller thinks or wants.

it comes down to the fact that you are not required to put down more than 20% and since it appraised lower you would have to come up with more of a down payment, therefore hands down you get your deposit back.

yeah! a financing contingency!!! GOOD FOR YOUUUUUUU!!!!!

Good job Urbandigs...nicely explained.

So, if you signed the contract a month ago and they added 1% depreciation for each month since you signed the contract, shouldn't the appraisal be down 1% and not 15%...not really sure what you are trying to say here

nothing in writing to developer (no email) as you try to neg down--the premise for your run away is that you cant get a mtge--if you document that a fallen price is really your issue, it could bite you

Unfortunately appraisals are coming in all over the map, a lot of this is due to the new rules regarding how appraisers are sourced. If you actually want the apartment you could always try a different bank and the second appraisal might be more useful. If on the other hand you really feel you are overpaying based on market conditions, then walk or renegotiate. A general mortgage contingency says you must make a good faith effort to get financing on the terms in the contract. If you would have to put more down then if you really want out-- you can get out.

The appraisal regs, known as HVCC, have been modified so that that brokers can talk to appraisers now. Have your broker provide new comps to the appraisers -- if you are not working with a broker, this is something that our firm might do for a flat fee.

ali r.
[downtown broker}

Caveat emptor.

"So, if you signed the contract a month ago and they added 1% depreciation for each month since you signed the contract, shouldn't the appraisal be down 1% and not 15%...not really sure what you are trying to say here"

The apartment was appraised 14% lower than the contract. The appraiser deducted 1% since the contract was signed a month ago.

Oh and the owner is demanding that I pay the difference.

Urbandigs: "APPRAISALS - NEGATIVE TIME VALUE - something that very few are discussing. Let us wake up the reality that the market has eroded and that the significant erosion in prices has not yet filtered through to closed sales. In comes 'negative time value' from the appraisal side. Now, when you do comps analysis on that property you are considering bidding for, you have to review comps from the past 6-8 months, which means the deal was signed into contract between 8-11 months ago or so. It's only when the deal closes that the purchase price is recorded as a matter of public record; and then used as a comp. Think about what will happen when NOV & DEC sales get recorded in JAN & FEB of next year! These fresh comps, that reflect the erosion I have been describing recently, will set the new hallmark for analysis!"

=> Urbandigs, before you pat yourself on the back, your analysis is incorrect. Appraisals are always backward thinking. They value a purchase today based on recent past sales. Appraisals are coming in lower than purchase prices now because prices have actually RISEN.

In other words, what closed 2 months ago, went into contract at the beginning of the year. Anyone who sold then, had to sell at a steep discount given the difficult economic climate at that time. People buying now are paying a higher price; therefore, it is not appraising out.

Hence, prices are now higher than what they were months ago. This is why we are now seeing appraisals come in lower. But many of these purchases will still close as the buyer will make up the difference with the lower mortgage amount. Therefore, in 2-3 months, we'll have a new bench mark for prices (higher one) and future appraisals will not be an issue (assuming prices stay the same).

Appraisals are always a problem with rising property values. They are never a problem when property values are going down.

If we are having appraisal problems now, that means prices are rising.

Correction. Appraisal is the appraisal. You either are paying too much or too little. You, the buyer is the newbie, the appraisal is the professonal. :)

Buyingnow: I fail to see the disadvantages in asking to back out of deal. You have a pretty solid case based on what you say about your contract. Either the seller gives you back your deposit or will renegotiate on price.

It's funny that no one has considered the emotional capital the OP has spent already: by the time yopu've gotten your appraisal, you've already moved into the unit in your mind, after what most probably was a fairly exhaustive search for "the perfect apartment". So now you've found it, negotiated a price and term at what you fealt was a good price, probably prepared a Board Package already, see yourself living there, SPENT MONEY on at least an attorney and maybe even an architect/designer.... and everyone is so blase about 'just quit teh deal and get your money back" like that makes the OP "whole".

I should refine my point - you should ask for your deposit back, and see where that gets you. More likely than not, the seller will negotiate.

I bought my condo in Stamford, CT in 1992.

When it appraised about $10,000 below our agreed upon price I too got cold feet. Long story short, the seller and I agreed to split the difference.

Something to consider.

That said, for what it's worth, I think we've got at least 20% further downside risk in the Manhattan market.

Why should the Seller renegotiate, they are in the driver's seat, worst case they keep his deposit and relist the apt.

For example:

Sale Price: $1mm
Deposit: $100k
Appraisal: $850k

If they renogiate to the new appraisal (in order for buyer to get mortgage, unless they want to increase the down payment), the Seller is down $150k from contract price

If they do not negotiate, take the $100k deposit and relist/sell at new appraised value of $850k, they are only down $50k from original contract

So as the seller, I would not negotiate more than $50k, or new sales price of $950k, otherwise I would relist at what appears to be a good price of $150k less than what the "Market" ie original buyer, thought it was worth one month ago and will most likely get a quick sale

It's in the contract - he has an out.

"Hence, prices are now higher than what they were months ago."

Really? Do you have some proof of this? Your argument is based on a big false statement, so you may want to check your math and your facts before you go and chastise Noah.

30yrs_RE_20_in_REO

Indeed, I have spent hours and hours on the coop application along with about $2k in fees.

And yet, $2k in fees would be peanuts compared to a 20% equity evaporation. If seller will renegotiate, seems like the best course of action.

Waverly: Yes, I do have proof of this. I see and review about 10 Manhattan appraisals a day. And many purchases (and not refinances - this is key) are coming in under. The comps from the past few months are lower than what people are entering into contract today.

If you read what I wrote carefully, you will know it is coming from someone who deals with appraisals on a daily basis (i.e. a professional).

I only speak on what I know and do for a living. You (and Noah) should try doing the same.

patty, prices rose steadily for years, inexorably one might say. zero difficulty getting units to appraise at offer. i have been seeing units not get financing for any number of months, for any number of reasons, including appraisals. maybe prices have been rising all along, and we were all just horribly wrong to notice a 20+% decline.

jonathan miller is the ultimate appraiser for this market. he is not anonymous and he says that prices are still in a downward trajectory. oh dear, who am i to believe?

My point I am trying to make is many people here are preaching and "educating" on subjects that they shouldn't be. You can't be an expert on all things. Keep to what you know. Because on a real estate board like this, you will be called out on it quickly.

I have no clue where prices are heading. What I have seen is evidence that today's in contract prices -on many deals - are higher than what were a few months ago which has complicated my job considerably.

patty, interesting way you've chosen to join the conversation.

aboutready: Prices are still lower than last year. But prices are higher than they were 5-7 months ago. What that tells me is that prices over corrected a few months ago. Anyone who purchased then are probably very happy. Those deals don't exist presently.

What the future holds is ? I can only speak of the present.

illiquid markets don't move in a linear fashion. anyone who has studied market corrections, particularly in manhattan, wouldn't be surprised in the slightest to see some ups and downs. the fact remains that prices were greatly abetted by insanely available credit and a willingness on the part of many buyers to overextend. and the fact remains that rents are falling, as is employment and income.

but if you want to point out that you've seen some "higher" prices, go right ahead. i'm seeing increased inventory again and some real movement in the stickier markets. we have no history whereby we can judge your credibility, so opine away.

Aboutready: This discussion got started from a buyer who had a purchase under appraised. He is not alone. Check recorded sales in a few months and you will see price increases.

I am only telling you what I see on the front lines and what is happening now.

If you think prices will start falling again, then fair enough. I don't know what will happen.

But I do have to disagree with you on falling rents. Rents have actually gone up slightly in the last few months too. They dropped overnight like crazy earlier in the year but have since leveled off and in some cases, have actually gone up a tad bit.

Patty you are the grunt looking at the enemy coming over the top. Well I am your fucking general telling you the second and third wave of the enemy is gathering up on the hills and you had better keep some powder dry.

Now go appraise something!!!!! F'n bunch of professionals who DID not see this shit coming, so excuzeeeee me if I toys my f'n doubts on your professionalism. Flmao. Do you at least measure it? Or can you get it off the floorplan?

Patty in your professionalspeak. Can you tell me how you 'price' in the greatest bubble in American/world history within the context of a falling dollar in an international city (NYC) given the rising peso relative to the euro, the decreasing airline capacity within these regions to NYC. Further given the housing formations which were so critical to the asset bubble, lax credit standards and current federal life lines given to the largest lenders in NYC. On top of that the decreased appetite to securitizations and pending interest rising.

Oh oh oh. I get it. Take 2% off from the last line sale if it comes up heads and up 2% if it homes up tails. WOW. That's some profession, do you tell the other parents at your kids school you are q professional? Fuck id take a porn star as a 'professional' over your 'professionalism'. You are just a tool, always have been always will be. Just a shock absorber as credit bounces up and down.

patty, regarding rent there is some seasonality involved, and some very determined landlords. but there are also some places that are offering THREE months f'ng rent as a concession. quite robust. the good months just ended, and unemployment continues to rise. good times.

and it's kind of funny that you tell me to check recorded sales. i'm a complete numbers nerd that LIVES for recorded sales, if you had spent any time here on this site you'd know that. i check comps so much my eyes are crossing. and i'm becoming jaded. i just found a prime property listed that i know is an early 2002 price, nominal not real, gorgeous classic six. went into contract in August, just now back on the market. i'm helping a couple of people look, so i can't announce it, but if neither of them are interested in put it up in a couple of days. and Noah/Urbandigs IS in the business, completely.

Pile ON!!!!!!!!!!!!!

Patty: it sounds like appraisers should always sign off on the contract price then because that is the only indication of "market value". That's myopic, no?

W67: I'm freaking out, because I'm sitting in USD right now, not having bought euros 5 months ago (I was convinced it would go lower than $1.2ish, greedy me).

10023, calm. the dollar will indeed implode, at least to some extent, but probably not tomorrow. damned globalization, makes these moves so much harder to call. having said that, i'll confess that i don't read the fx or commodities tea leaves any longer. wait, i don't read the equities tea leaves also. even everybody's golden children, corporate and muni debt? it's all just tea leaves.

w67th, the gov't has a hard on for propping up housing prices right now, and well, duh, of course, because they own so much securitized crap that depends on elevated housing prices to retain any semblance of value.

but we have ourselves here a JUMBO problem. and there isn't enough political will in the world to prop up the "higher" level manhattan prices. the russian investors at the plaza will just have to take their lumps. as i've often said, i feel so sorry for those new buyers who think they are "getting in" and "getting a decent deal" because they can take advantage of disastrous measures being taken to allow them to buy cramped apartments. this is going to be an interesting squeeze.

AR: yeah. I did say that if euro hit x or CAD hit x or yen hit x that I would buy. But the exchange rates came close, not quite there. Housing is also overpriced in Europe, same speculative crap happened there. Same denial. Hard to know exactly what's going on in PRC. I think I should stock up on antibiotics & guns.

10023, the problem with europe is it is such a mixed bag. for example someone the other day was saying how well the spanish banking system had done. but spanish real estate is a nightmare. and a lot of the speculative buying was foreign interest in second homes. the uk is a fright show, but i think people put more down on their homes. i know they tend to buy later in age than we do.

the PRC is a complete and utter fuckfest. their QE puts ours to shame. a time bomb that most people have zero clue about.

make sure you're not resistant to the antibiotics you stock up.

They don't have 30-yr fixed mtges in the U.K. I think 5-year is the longest term you can get - which means owners are enjoying a bonanza right now in terms of monthly payments. Not looking forward to seeing what happens when rates go back up as people have enjoyed more cash in their pockets recently.

What Patty says seems completely logical. I think some people here are having aversive reactions to her comments because they are reading her messages incorrectly. She (or he, maybe?) is talking about "appraisal" strictly in its real-estate financing definition, which deals w/ the dollar amount based upon which lenders decide how much to loan you--based on the recent (previous) sales. What s/he describes appears both plausible and accurate for this purpose.

S/he is NOT talking about the recent fluctuations in appraisals as an indicator of: (1) sales volume; (2) NYC real estate having "bottomed out"; or (3) where we may be heading from here. That's not what s/he is saying AT ALL. She clearly states that she cannot predict the future.

Also, if anyone thinks the real estate bubble we had here was the worst in world history, you might want to check what other nations have experienced. We did not see an overnight 50%, 60%, or 70% decline like Japan did just over a decade ago. Seriously, I don't know what "switch" got turned on, w67, but use of expletives doesn't seem necessary or helpful here.

nyc212, your last paragraph is contradictory. just because we have not yet had the 50+% declines does not mean we did not have the bubble. your argument is actually very consistent with mine. we have had huge increases relative to income over the last ten years, and there is still plenty of room down.

my beef with patty is the simple assertion that she says prices are rising. of course one can't determine that without a very significant exposure to the numbers. if patty "sees and reviews" ten appraisals a day, that would be 200 a month. that would be a very high percentage of the manhattan sales market, if that is where her work is based. i'm not an appraisal expert, but i'm not buying it with what i'm seeing right now in terms of current property listings.

I find it interesting that no one seems to be addressing my point that this is probably solvable with a new set of comps and a re-appraisal.

ali r.

front_porch / ali

I did consider it and talked to my mortgage broker and lawyer about it. They told me that the difference could be marginal (10-20k +/-) hence not worth the effort. I was reading that appraisal report and the comps they used were pretty sound in terms of balance between sale/sold units in building and also in the neighborhood.

Regardless, how much would it cost for your service?

"I was reading that appraisal report and the comps they used were pretty sound in terms of balance between sale/sold units in building and also in the neighborhood."

If that is the case, aren't you saying you agree you were going to overpay?

'My point I am trying to make is many people here are preaching and "educating" on subjects that they shouldn't be. You can't be an expert on all things. Keep to what you know. Because on a real estate board like this, you will be called out on it quickly.'

nyc212. My faked offense was to patty's condescending attitude. I heart the part about being called out. Let me just say I gotz some experience in re and don't remember a time when so so so so many people were either in re or talked about re. Fwiw, don't give a crap about last 3 months cause I didn't buy the last 3, I'm looking to see where NYC re will be in the next 1-3 years. I've NO doubts will be lower with better inventory on the rental as we'll as buy side. Said it my first post and I'll say it again - $500 psf prime manhattan.

Buying now, I would look at the appraisal report and comps and tell you if I thought you had a case -- my ability to do this quickly frankly depends on where the target apartment is (I'm really strong South of Central Park, really weak on Brooklyn, probably intermediate most of the rest of Manhattan).

If I thought you did, I'd probably charge $1,500 to generate new comps, and you'd probably end up paying $750 for a new appraisal.

ali r.
{downtown broker}

BuyingNow - how long between the time you went into contract, your appraisal, and scheduled closing date?

Amity95

Its been about 1 month since I went in to contract. 1 week turn around in appraisal. No closing has been set.