As a Realtor on Hilton Head Island, I'm beginning to hear more and more grumblings about difficulties in getting favorable property appraisals in this market.
Over the past few months, the good news has been a pick up in sales activity, but the bad news is the majority of the properties that are selling are either short sales or foreclosures. The prices these properties are selling for is fast becoming our new "Market Value". If an appraiser is valuing a home, and the neighborhood has only had 4 sales in the past 6 month the likelihood of 2 or 3 of the four sales being a distress sale is very good. The appraiser must use these distress sales as comparables in his/her appraisal. In our market, we have been talking about this with our sellers for almost 8 months.
This past Thursday National Association of Realtors President, Charles McMillan, sent an email to all Realtors acknowledging the problem and the impact it is having on housing recovery. Mr. McMillan went on to describe the plans NAR is implementing to help overcome this emerging issue.
In another article I read this morning. Subodh Kumar, chief investment strategist at Subodh Kumar & Associates reported "The housing number suggests that things are bottoming, but that's a far cry from improving. I think the markets are focused on how fast the recovery is going to be, and I think it won't be as fast as people are thinking".
A Realtor's report showed sales remained down 3.6% compared to May last year. Chief economist, Lawrence Yun, said sales in some areas appeared to be losing momentum and blamed the slower rise in May sales to poor home value appraisals, which he said were stalling transactions.
"Pending home sales indicated much stronger activity, but some contracts are falling through from faulty valuations that keep buyers from getting loans," he said. He went on to say “There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected."
