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I have read your recent posts about almost overpaying for a house by $100,000, and frankly, I think that you are being far too casual about the fact that you came close to decimating (or worse) your net worth. I am unclear on how much you money you are borrowing, but those are real dollars that have to be re-paid. I mean this appraisal averted a disaster for your family. I would send a thank-you note to the appraiser and fire the realtor. I would also seriously consider stepping back from the house buying process for six months and study the market area that you are interested in.
Being a fence sitter, I would be interested to hear about any details you have on potential changes to this credit. Particularly as it concerns extending the timeframe and/or increasing the credit.
Thanks
I don't have any details, but when I get something concrete I will post it.
Is the CMA like the list of sold homes? Yeah, our house was about $15/sqft above the average. I will, however, ask him what you suggested. That's a good question. We do love the house and we're extremely peeved that this happened. I just don't know who we should be mad at.
Let me ask you this: what's the relationship between the County's Tax Assessor's appraisal of the home vs, the sales price? The reason I ask is b'c when we made the initial offer on the house, I looked at the County's webpage and our offer and the assessed value was just over $100K difference. The bank's appraisal came back even lower: $10K lower. I know those two numbers are never the same but is there usually that big of a difference between the County's assessed value and the sales price?
(sorry for being off-topic everyone)
A CMA is a Comparative Market Analysis.
It compares similar properties that have Sold within the past 90 days within a certain distance from the subject property. That tells you what the market has been for these properties.
It also compares the Listed properties with your subject property.
That tells you what your competition is doing. In a declining market the average Listed prices will usually be lower than the recent Sold prices average, so greater weight may need to be given to the competitive Listed prices.
Looking at the number of Pending (homes currently under contract) gives an idea of where the market may be headed in your area in the next month. You won't know the price until escrow closes, and they are not used in the CMA, but it will tell you what price ranges are moving.
We do not have sufficient information for anyone to advise you who to be mad at, or whom to fire. All we know is that the appraiser valued the property lower than the selling price. We don't know why, but I know that when two people do a CMA, they are likely to select different comps, and while they may be in the ball park, they probably will not arrive at the same number.
My business partner and I do a CMA on each of the properties that we buy, and it's not uncommon for us to be apart on the numbers. If we're far off, we try to find out why we're off. If we're not too far apart, we'll use a range, and depending on the spread we're looking for we'll either use the middle of the range, or the bottom. There is a lot of subjectivity in doing an appraisal, in addition to using the numbers.
Lenders use a certain pool of appraisers, and those appraisers want to keep their lenders as clients. Therefore, it may be entirely possible that the lender wants the appraiser to be ultra conservative in their appraisals.
You are the only one who can make your buying decision, whether it's this house or different one. No one else knows your unique situation and your needs.
I don't use the tax assessors numbers to make a property valuation. I will look at it to make sure I don't see something far out of the ordinary, like a house priced at a million dollars with a tax valuation of 200k.
I know there were other factors besides investors that caused the economic disaster we're in right now, but I wish we can keep those greedy investors out of the real estate market to prevent another real estate bubble that will get bigger, then burst and cause another economic disaster in the real estate sector. There needs to be something to stop that and give the average consumers, like the couple I talked about in the previous paragraph, more leverage in the process, than an investor with cash.
Mke, I understand where you're coming from, however, this is a capatilistic society where people have the freedom to invest, speculate, or be entrepreneurs in whatever field they choose. Think about what would happen to our society if the government controlled where one could invest their money.
Yes, sellers do prefer cash, especially today when so many mortgages do not close. The seller has his property tied up for 30 to 45 days while the market is still declining, and all of a sudden the buyers mortgage is declined. Now the seller has to put the house back on the market at a lower price. This has cost the seller a lot of money. That's why banks will prefer cash.
AZJack, as I understand it now, you do not have any information that can refute what Mike Orr of the Cromford Report has in his reports. So your criticism of him appears to be based on the fact that he is also a realtor, and as you label him, a speculator.
I would prefer to call him an investor, and I'll explain why.
An investor is one who has studied the investment product and weighed the risk/reward involved. The primary concern is to minimize the risk while maximizing the return. The investor is looking for a lower level of profit than the speculator.
The speculator may not, and usually does not (circa 2005) have, or utilize, all of the information available prior to making a decision. The speculator is willing to accept a higher level of risk hoping that he will enjoy a higher than average profit. Sometimes they win big, and sometimes they lose big. Just like at the crap tables!!!
There are many landlord type investors in real estate who make a very good living because they understand the business and they have done their homework and made pro-formas based on the expenses and expected vacancy factor vs the rental income.
Any increase in property value is secondary to the landlord investor.
So while owning Queen Creek rentals may not be your cup of tea, there are others who see the value and are willing to do the work. I don't buy in QC simply because I don't want to drive out there. It's too far for my business model.
There are few in the valley who know the local real estate market better than Mike Orr, so while you may not like him because he is a realtor, you will have a very difficult time trying to discredit him.
I'm an investor also, (not a speculator) but I am only keeping a couple of the homes that I buy each year as rentals.
Mostly I wholesale or rehab the properties that I buy, for cash flow. This is not speculating because I spend a lot of time staying on top of the market, and evaluating the risk/reward of the properties I buy.
I know how much I can sell the property for prior to making the purchase, because I understand the current market, and I get them sold usually within 30 days. Once I know what I can sell the house for, then I determine how much it will cost me to fix up and the selling costs, cost of carrying, etc and my required profit margin. Then I arrive at a purchase price goal. That is running an investment business. Nowhere near speculation.
I have read your recent posts about almost overpaying for a house by $100,000, and frankly, I think that you are being far too casual about the fact that you came close to decimating (or worse) your net worth. I am unclear on how much you money you are borrowing, but those are real dollars that have to be re-paid. I mean this appraisal averted a disaster for your family. I would send a thank-you note to the appraiser and fire the realtor. I would also seriously consider stepping back from the house buying process for six months and study the market area that you are interested in.
Azjack - What I'm trying to do is keep my cool as I have a tendency to over-react but trust me, I am p*ssed off. There are many factors that I'd rather just not divulge on city-data but the homes value is worth more than the appraised. I'm not an expert but I know a good home when I see one. You are right though, I should be (and am) grateful for the appraiser to shed light on his take of the value of the home. I have considered firing the realtor but again, it's not as easy as it is on the Apprentice to just say "you're fired"! Or maybe, it is that easy and I'm the one making it complicated. <shrug> At any rate, I do appreciate your advice. I just want to wait 'til the sellers come back with an answer on Monday/Tuesday and go from there.
Quote:
Originally Posted by Captain Bill
A CMA is a Comparative Market Analysis.
It compares similar properties that have Sold within the past 90 days within a certain distance from the subject property. That tells you what the market has been for these properties.
It also compares the Listed properties with your subject property.
That tells you what your competition is doing. In a declining market the average Listed prices will usually be lower than the recent Sold prices average, so greater weight may need to be given to the competitive Listed prices.
Looking at the number of Pending (homes currently under contract) gives an idea of where the market may be headed in your area in the next month. You won't know the price until escrow closes, and they are not used in the CMA, but it will tell you what price ranges are moving.
We do not have sufficient information for anyone to advise you who to be mad at, or whom to fire. All we know is that the appraiser valued the property lower than the selling price. We don't know why, but I know that when two people do a CMA, they are likely to select different comps, and while they may be in the ball park, they probably will not arrive at the same number.
My business partner and I do a CMA on each of the properties that we buy, and it's not uncommon for us to be apart on the numbers. If we're far off, we try to find out why we're off. If we're not too far apart, we'll use a range, and depending on the spread we're looking for we'll either use the middle of the range, or the bottom. There is a lot of subjectivity in doing an appraisal, in addition to using the numbers.
Lenders use a certain pool of appraisers, and those appraisers want to keep their lenders as clients. Therefore, it may be entirely possible that the lender wants the appraiser to be ultra conservative in their appraisals.
You are the only one who can make your buying decision, whether it's this house or different one. No one else knows your unique situation and your needs.
I don't use the tax assessors numbers to make a property valuation. I will look at it to make sure I don't see something far out of the ordinary, like a house priced at a million dollars with a tax valuation of 200k.
Catain Bill - I responded to your DM before reading this. I guess it would be a good idea to get a "third party's" CMA. At this point, I don't think a CMA would be helpful for this house. If we end up losing it and have to start the process over again, and if your offer is still open, maybe we can consider doing this on the next property.
I definitely feel better after your post. I will have to keep everybody updated about what happens. I know it's easy to take sides and we quite often are "quick to blame" someone for something that may be "unblameable", especially when so much is as stake (and being a first time homebuyer!) so thank you thank you (like for the millionth time) for your objectivity.
Mke, I understand where you're coming from, however, this is a capatilistic society where people have the freedom to invest, speculate, or be entrepreneurs in whatever field they choose. Think about what would happen to our society if the government controlled where one could invest their money.
Yes, sellers do prefer cash, especially today when so many mortgages do not close. The seller has his property tied up for 30 to 45 days while the market is still declining, and all of a sudden the buyers mortgage is declined. Now the seller has to put the house back on the market at a lower price. This has cost the seller a lot of money. That's why banks will prefer cash.
Bill, I am a Reagan type conservative and against big government interfering with our lives, and I'm not saying government should control where one could invest their money, I'm only suggesting something that would prevent a situation like the one I mentioned in my previous message from happening again, in which a young couple were in the process of getting their mortgage when an investor stepped in with cash and bought the house.
"AZJack, as I understand it now, you do not have any information that can refute what Mike Orr of the Cromford Report has in his reports. So your criticism of him appears to be based on the fact that he is also a realtor, and as you label him, a speculator."
Orr takes data through a special arrangement with the MLS, and prepares charts, etc. Do I believe that he is manipulating the realtor-inputted data that he presents? No. One can focus on some facts (like recent high MLS sales of low-priced REOs, but overemphasize their importance based on other factors like the post-moratorium record foreclosure filings). But since you quote him regularly, it is important that people know that he has purchased multiple houses as he calls this bottom in the Arizona Republic newspaper and other fora. Someone whose income was derived from providing great data and analysis would probably avoid this. For example, I doubt that Professor Karl Case is buying up REOs in Southie.
Also, his special relationship with the local MLS yields an apparent pro-transaction agenda in some of his commentary. The Cromford Report actually has a "Good News" section and a "Good News Archive," presumably to allow realtors and allied tradespeople to show how great a time it is to buy houses in Arizona. He also has written attacks on anything contrary to his recent bottom calling. For example, he is highly critical of the data model created by Professors Case and Shiller that demonstrate the enormous price decline in Metro Phoenix and other cities. I think that most people would trust the analysis model of two well-respected economics professors over the analysis of this realtor outfit. Professor Shiller correctly identified the factors at play in both the tech bubble and the housing bubble, and made his warnings public.
Another example is an attack on the shadow inventory articles. I believe that their authors (from respected publications) are referred to as Art Bell supernatural conspiracy theorists and in other derogatory ways.
So, as you quote this Report, readers here should know that it is hardly a detached analysis.
What is the Orr position on the eight to ten thousand foreclosure filings every recent month in Maricopa County? I am sure that it is deemed to be of little consequence since the bottom in house prices has been declared.
And having a "Good News" section and a "Good News" archive, that is a bit Orwellian.
Jack, I recall once before you accused the MLS of manipulating of data, and I requested that you send me the mls number of any plano that you saw that was an abuse of the system so I could report it; but you were never able to produce any proof.
You attack anything that is remotely associated with the realtor industry, and especially if it does not agree with your philosophy, and anything that has news that is not what you want to hear; so I shouldn't be surprised that now you choose to attack Orr.
Orr's statement on the Case-Shiller report is that it is a rolling quarterly report as opposed to a weekly or monthly report, and therefore, is a historical report and not a report of what is happening in this market this week.
In your criticism of Orr, you neglect to mention that in 2005 Orr was very negative on the market. And that was prior to the price decline in 2006, because the trend of rising inventory and the declining sales were were indicating that there would be a drop in price to follow.
You mention that Orr has called the bottom, and yes he did that on April 6. However, if you go on to read, he says that is not in all areas, and that doesn't mean that there will be big price increases. I believe his opinion is the same as mine and that we will have up and down spikes with the market remaining relatively flat.
Orr takes data from the MLS and from the county recorders documents; not just the MLS.
There is absolutely nothing wrong with either Professor Case or Shiller, or Orr, or anyone else buying a property for an investment. I find it refreshing when one whom I respect as having tremendous knowledge of the market is also buying property to hold as a landlord investor.
Quote:
Another example is an attack on the shadow inventory articles. I believe that their authors (from respected publications) are referred to as Art Bell supernatural conspiracy theorists and in other derogatory ways.
Perhaps you would like to quote his attack so that everyone will know what is actually being said, instead of some hint that he is making a blind attack on "respected" publications.
Quote:
What is the Orr position on the eight to ten thousand foreclosure filings every recent month in Maricopa County? I am sure that it is deemed to be of little consequence since the bottom in house prices has been declared.
Each month, a few days after the first, he publishes the foreclosure filings, and I have been putting them on CD for everyone to see. You read the non-subscription part of his information, so why don't you post what he has to say.
Quote:
And having a "Good News" section and a "Good News" archive, that is a bit Orwellian.
The Owellian analogy is a bit over the top even for you.
However, I can understand why you object to his "Good News" section. Perhaps I'll ask Mike to add a section just for AZJack called "Bad News". Will that make you happy?
You see Jack, it's the media that looks for Bad News, so that they can glamorize and capitalize on it. There is very little Good News in the media, because it doesn't sell.
Maybe that's your problem; you've been watching nightly news too much. They only know how to publish shootings, rapings, kidnappings, and trashed houses. Start looking for some good news to balance all that negative news.
But in this real estate market where people have lost their homes, and are losing value every day, people do want to see the Good News that is available. And there is plenty of it, whether you want to accept it or not.
But since you're obviously not a subscriber to the Report, you wouldn't know that the Good News section is simply a small section that briefly discusses the Cromford Index, which is increasing, and that is
Good News.
There is a very large "Recent News and Commentary" section that discusses the market and the stastics at depth to help subscribers understand more of it.
The Cromford Report, published by Mike Orr and Tom Huff is a highly respected publication that has been used by Alan Langston, the Director of AZREIA and PHXRIEA, for it's members for a long time. Alan is one of the most knowledgable people in investing in this area, and recognized the value of this publication for the members.
More recently, the ARMLS recognized the value of the information and gave it's members free subscriptions til the end of 2009.
So while you may attempt to discredit Orr and the publication, simply because it doesn't agree with your Bad News Only philosophy, there are plenty of knowledgable people who would disagree with you because they recognize the value of reliable and timely statistical information for the Phoenix area.
Jack, you and I go back and forth on this stuff a lot, so I want you to know that I do not take any of it personal. I'm only addressing your message, not you as a person.
You guys seem to be knowledgeable people who disagree a lot. That is okay. I am not as knowledgeable about the housing market. I only know what I see. Right now I see the $8000 incentive to first time home buyers having a huge effect on the market as well as investors coming back in to scoop up the lower end homes hoping to make a profit over time. Problem is they are competing for the same homes. Multiple offers, etc.
I see at least 5 homes on my block sitting vacant with no for sale signs. (I am renting an entry level home in Surprise, waiting to close on a permanent home in Surprise), I see this as an attempt by the mortgage holders to regulate the amount of inventory available, hoping to stop the downward price spiral. Is this correct?
We still have a large un-employment rate. Maybe even increasing throughout the year yet. Will this still be a factor?
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