Welcome to San Diego Blog | January 8, 2010
Home Appraisal Mayhem
San Diego and especially Downtown San Diego are feeling the burden of appraisals that are making home sellers take a bath.
We are experiencing many appraisers coming into San Diego from Riverside and Orange County and they are not familiar with the different neighborhoods and different buildings. They frequently compare luxury high-rise buildings with average quality mid-rise buildings and even worse, give a $10k upward adjustment for a property that is 15 stories higher with an amazing view.
Even when we get good appraisers into the local markets, the sales comparables they are using are frequently San Diego short sales and foreclosures. Roughly 41 percent of all home sales this year in San Diego were foreclosures or short sales, meaning the property sold for less than the mortgage. These short sales and foreclosures generally sell for less than what traditional “equity sales” sell for.
If you’re trying to sell your home in a neighborhood where foreclosures and short sales are predominant, an appraiser could determine your home is actually worth less than what a buyer is willing to pay. This is where we completely lose the concept of fair market value which is what a willing and able buyer and seller are willing to agree to without duress.
How Does this Affect You?
I had a buyer that agreed to buy a Bank of America foreclosure at Parkloft in the East Village for $469,000 for approximately 1700 sq/ft which is adjacent to Petco Park. He was ecstatic about the price and was getting what would have been the lowest sale price per square foot in the building.
He had to obtain financing and ordered an appraisal with Landsafe, Inc who is owned by Bank of America. They sent out a part time appraiser from San Clemente and she had never seen a loft before. She did her evaluation of the property and came back with an appraised value of $419,000. She didn’t even assign any value to the second parking space!
What ended up happening is that Bank of America had to lower the sales price to $419,000. This property had 5 other offers well above $419,000! It looks like B of A not only shot themselves in the foot, but they just lowered the value of every other property in the Parkloft San Diego Condo building. This is a perfect example of a terrible appraisal that affected not only the seller for this sale, but all future sales for at least the next 6 months.
The National Association of Realtors states that nearly one in four of its members has reported clients losing a sale due to botched appraisals. The National Association of Home Builders, meanwhile, said low appraisals were sinking a quarter of all new home sales and argues it’s not fair to compare distressed properties to brand-new homes.
This is why it is important to work with selling agents that have the entire sales process wired. Your agent needs to have a great escrow officer, loan officer with access to good appraisers, great title reps, short sale processors and even good home inspectors. Contact us to guide you through the sales process to ensure a great outcome!