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Appraisers struggle to keep up with falling values | ajc.com (http://www.ajc.com/business/content/business/stories/2009/04/05/home_appraise_atlanta.html - broken link)
Relocation companies routinely order two independent appraisals on an outbound relocation. Some relo companies are ordering three and occasionally 4 independent appraisals.
The relo company offers the transferee a buy-out equal to the average of all appraisals. Transferred sellers increasingly are unable to sell their homes for more than the buy-out, despite financial incentives to do so, so they take it.
At that point, the property becomes relo-owned and continues to be offered for sale. I cannot think of an instance where the home sold for an amount that was equal to the buy-out.
The reason for this is that the appraisals were based on closed comps over the past three months. The contracts of those closed comps were written 1-3 months before those sales were closed. By the time the buy-out occurs and the home is vacated, the data from those original comps can be as much as 9 months old.
9 months is an eternity in real estate, regardless if the market is appreciating or depreciating.
In appreciating markets, transferees are almost always able to sell their home for more than the buy-out because the buy-out is the floor value. In depreciating markets, transferees take the buy-out because in most cases, the amount represents the ceiling value.
Thanks for posting these; we are in a similar situation as the people in the second article. We are trying to buy a house from the late 1800s, 4000 sq ft--just got word yesterday that the appraiser is having a difficult time coming up with a number because there are NO comps. If it is old enough, it is half the size, or in worse condition; if it is the right size, it is way too new. This is a very small town and lots of people have been here for generations--there's just not a lot of movement. The appraiser apparently asked the lender if he could use comps in two neighboring towns with similar homes, but was told no way.
Is it possible he won't be able to come up with a number, or even if he does the lender won't accept it because there are no comps to back it up?
I try to post articles that I think ppl in this forum wud be interested in, so thanks! Re: no comps, I am in the same boat; trying to buy in an area where there are few if any comps. First off, there are few sales, and 2nd, I am trying to buy "the last 1950s tear-down" in a neighborhood dominated by new-build (million and up). I dunno how an appraiser will appraise a 1950s tear-down in a declining market in which the only thing selling is stuff built in the 90s and 00s for much more. I have been told by more than one appraiser that it will be very hard for the house to appraise at my purchase price.
With the way the market is crashing that is like asking what a plane is worth after it hits the ground.
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