More conversation fodder for Sacramento real estate

Today I have some more fodder to share for the next time you’re talking about local real estate. Check out the images below and you’ll be able to answer: What usually happens to sales volume in April and May in Sacramento County? What role are interest rates and inventory playing in the market right now? You can scan the images briefly or take a few minutes to read the text too. Any insight or questions? I’d love to hear your take in the comments below.

April Sales in Sacramento County - by sacramento appraiser blog

Monthly Sales: Here are all monthly sales in Sacramento County since 2001. The dark lines are the month of April.

April Sales in Sacramento County 2 - by sacramento appraiser blog

March vs. April: Here is a bit of a closer look. What happens with sales volume from March to April? What happens after the month of April?

change in sales volume from march to april - by sacramento appraisal blog

Change in Volume: There really isn’t a definitive pattern other than to say sales volume in April is usually about 5-10% more or less than what it was in the month of March. This time around it looks like there is going to be an increase in volume from last month to this month. On the other hand, sales volume almost always increases from April to May, so we can likely expect more sales in the next bit of time so long as the market behaves “normally”. Ultimately, sales volume is ALWAYS higher in March through May than the beginning of the year, which shows the consistency and reality of the Spring seasonal market.

median price and inventory - by sacramento appraiser blog

Median Price & Inventory: Can you see how over time lower inventory tends to lead to increases in value whereas higher inventory tends to cause a cooling or declines? The same holds true for interest rates as you can see below. Right now inventory is around 2.0 months, which means there are about two months worth of houses listed for sale on the market. Keep in mind there were about 2400 listings at the beginning of this month and roughly 1200 sales last month. We get 2.0 months by dividing the number of listings by last month’s sales (2400 divided by 1200 = 2).

real estate trends in sacramento county 2 - by sacramento appraiser blog

real estate trends in sacramento county with unemployment 2 - by sacramento appraiser blog

real estate trends in sacramento county with unemployment - by sacramento appraiser blog

Seeing the Layers: I call these my busy graphs because there is so much going on – especially in the last one. This is how real estate works though. There are many different “layers of the market” that influence value at any given time. It’s never just about supply and demand. There is always more to the story.

Questions: How do these graphs strike you? Any thoughts or insight?

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3 talking points for Sacramento real estate

Let’s look at three trends today. Instead of only unpacking Sacramento County though, let’s glance at the region as a whole to understand larger dynamics at hand. I hope this will help give you a few more real estate talking points, whether for conversation with friends or clients. Any thoughts?

1)  It’s taking 20% longer to sell properties compared to last year

days on market for sac placer yolo el dorado county - sacramento appraisal blog

It’s not earth-shattering news that properties are spending more time on the market these days compared to last year. It’s simply one of the byproducts of having more housing inventory. Keep in mind 47 days is actually really quick considering sales in March 2012 took more than 80 days.

2) Inventory is up by 110% compared to last March

inventory in sac placer yolo el dorado county - sacramento appraisal blog

The Sacramento Region had just above one month of housing supply for an entire year. Inventory began to increase when interest rates shot up from 3.5 to 4.0% between May and June 2013 (and investors also began exiting the market around this time). It’s easy to get sensationalistic about a stat like this, but remember that current inventory is still VERY low.

3) Sales volume is down 17% from last year

SACRAMENTO region sales volume - by sacramento appraisal blog

Sales volume has been really low lately. The first quarter of 2014 was down 17% in sales volume when compared to the first quarter of 2013 and 25% from the first quarter of 2012. As you can see above, cash sales are an X-factor for why volume has been low, and the market has been feeling the impact. This is true in Sacramento County, and it’s true when looking at the region (Placer, Yolo, El Dorado & Sacramento).

BONUS: The first quarter of 2014 saw a 44% decline in cash sales compared with Q1 2013.

A quick video of where the market is. Watch below or here.

I hope this was helpful.

Sacramento Bee Quote: By the way, I wanted to share that I was quoted in a SacBee article last week entitled Sellers’ market has few sales. That’s always an honor. Thank you to anyone who clicked over from the story or even subscribed. I really appreciate you being here, and I’m looking forward to talking together.

Questions: What stands out to you above? What are you seeing in the trenches of the local market? I’d love to hear your insight. Comments are welcome below.

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Understanding how it works to appeal property taxes

When the market gets hot, people tend to forget about their property taxes. Even the Sacramento County Assessor shows there were 35% less appeals filed last year compared to previous years (see graph below). We all know the market increased rapidly in recent time, but some people frankly still should have appealed, but they didn’t. Here is how the appeals process works and some tips to consider for this year.

Real Estate Agents & Loan Officers: Knowing these tips makes you well informed and an enormous asset for your clients (download a larger image to use in your newsletter). I hope this helps.

flow chart for appealing property taxes - by sacramento appraisal blog - white 530 - 2

10 quick things to know about appealing property taxes

  1. The Date: Your assessed value is based on January 1 of the given year – NOT today’s value.
  2. 2004-2007: If you purchased from 2004-2007 in particular, be sure to pay attention to your property taxes this year since the market is not quite back to those price levels yet in many cases.
  3. Wait Until July: Wait to see how the Assessor assesses your property before deciding to appeal. New assessments should be out in very early July. Do NOT hire anyone (including me) to help you appeal before you know what your assessed value is.
  4. Your Wallet: Remember that ever $10,000 in assessment is about $125 out of your pocket. This is a good gauge to keep in mind to help you decide whether it is worth it to appeal or not.
  5. Deadlines: You can begin appealing in early July, but the deadline to dispute property taxes in Sacramento County is usually November 30 (sometimes December 2). The deadline to appeal property taxes in Placer County is usually mid-September (dates will be announced by July).
  6. Two Form Options: There are 2 forms you can fill out. The Prop 8 “Decline in Value” form is a free informal review and the Application for Changed Assessment is $30 and is an actual appeal. Knowing the difference can make a huge impact for you and your clients because sometimes people think they appealed, but they actually only filled out the free form. Here is a brief video explaining the differences between these two forms.
  7. My Recommendation: In this market I recommend filling out the free Prop 8 “Decline in Value” form first, but if you don’t hear back by October in Sacramento County or August in Placer County, file a formal appeal. The Prop 8 form has no weight or power to take your appeal further once the appeals deadline has passed. In other words, if the Assessor disagrees with your value on the free form, you cannot move the conversation forward or have the right to an appeals hearing once the deadline to appeal has passed (since you did not actually file a formal appeal).
  8. Lowball: Don’t lowball your value.
  9. Comps Near January: Support your value with sales close to January 1 of the given year. Make sure your “comps” really are comparable. Don’t just use the lowest sales in the neighborhood. Use whatever is comparable.
  10. What Happens After You Appeal: The Assessment Appeals Board will either agree with your value, propose a new value that you can either accept or reject, or call for an appeals hearing. Try to resolve your appeal before the hearing. Otherwise bring your support to the hearing and argue your case. Resolving your appeal prior to the hearing can happen over the phone with whatever appraiser is assigned to your case. This is where knowing the market and all comps really well comes in very handy.

By the way, this graph shows the number of appeals filed last year after the market really heated up. What will happen this year?

graph of assessment appeals filed

flow chart for appealing property taxes - by sacramento appraisal blog - white 2A Resource for Your Blog & Newsletter: For my real estate friends, let your clients know about the tips above by forwarding this post. Or you can use my property tax flow image on your blog, Facebook or in your newsletter (just link back to me). Here is a larger-sized image too in case it’s relevant. Just click on the thumbnail and save to your desktop.

My Services: I’ve done quite a bit of work with “decline in value” property tax situations, but also with escape assessments and other base-year value challenges. I don’t use a full appraisal because it’s really not needed in most cases. Instead I developed a more limited custom valuation product that is amply informative, yet it costs less than a full appraisal.

Questions: Any other tips? Why do you think there were less appeals filed last year? Have you ever disputed your property taxes and found success?

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How do appraisers come up with square footage adjustments?

Have you ever wondered how appraisers come up with square footage adjustments? Why is the adjustment sometimes so low? Is it just a guess or is there some sort of methodology? Let’s take a quick look at four options for determining how much extra square footage is really worth.

4 options for making adjustments for square footage:

  1. Image purchased at 123rf dot com and used with permission - 14688774_s - smallerMake up a Number: Not a good method. Any adjustment in an appraisal report is supposed to be based on the market instead of a guess.
  2. Use one standard figure: Sometimes appraisers are known to use one cost adjustment figure for every single neighborhood. This is bad since some neighborhoods will pay far more for extra space. For instance, a lower-end neighborhood in the Sacramento area could easily see adjustments around $30 per sq ft for extra square footage, but a higher-end area might see adjustments beyond $100 per sq ft. Also, when the market is hot, the price gap between small and large homes tends to squeeze together a bit more, but when the market is declining, values tend to spread further apart.
  3. Use cost figures: Cost plays a role in determining adjustments to a certain extent, but keep in mind appraisers are really looking at what the market is willing to pay for something rather than what it costs. For instance, an addition might cost $50,000, but that doesn’t necessarily mean the addition would actually add $50,000 in value. How much would a buyer pay for the extra space? That’s the question the appraiser has to answer by finding similar properties in the neighborhood or market area. What if the owner overbuilt for the neighborhood? Or what if the owner added a $50,000 Yoda-shaped room? Stars Wars fans might love it, but others would probably run. The same is true for a built-in pool. It might easily cost $35,000, but buyers are simply not willing to pay for the entire cost of the pool in the resale market. Can you see why cost might not necessarily translate into value?
  4. Analyze sales in the neighborhood: This is the best method. Compare houses in a neighborhood to determine the adjustment. Or in other words, find matched paired sales to discover what buyers are willing to pay for a certain feature. For instance, if you find a house that sold at $230,000 at 1700 sq ft, but a very similar house sold at $220,000 at 1500 sq ft, that tells us the market paid an extra $10,000 for 200 extra square feet. In this case the adjustment for square footage would be $50 per sq ft since $10,000 divided by 200 equals $50 per sq ft. This is just one example though. It’s important to find several other matched pairs so you can make a reasonable judgement about what the market is willing to pay for extra square footage. See the example below. Can you see how the adjustment for square footage is a reflection of what the market is willing to pay?

What does the market say the extra square footage is worth?

square footage example in appraisal report - by sacramento appraiser blog

Keys to Remember:

  1. Similar Size: Compare similar-sized properties to the one you are trying to value. The market might look at larger and smaller properties differently, so if you want the proper adjustment, you’ve got to stick with comparing apples to apples so to speak.
  2. Condition: Remember to consider upgrades and condition in your analysis. An upgraded property might sell for substantially more than a fixer. This is why properties in the most similar condition will be your best comparisons when trying to extract a reasonable adjustment for square footage.
  3. Know the Market: Sometimes smaller homes can sell for more than larger homes. It’s easy to assume a larger home will sell for more, but at times certain smaller models may carry a value premium for whatever reason, which causes them to sell for more. This is where knowing the neighborhood market comes in handy.
  4. Data Sample: Use more than just one comparison to substantiate how much extra square footage is worth. More data helps build a stronger case.

When I get asked how much appraisers adjust for square footage, I think my answer sometimes disappoints real estate agents and home owners. It would be nice to share a very concrete number, but saying, “It depends on the neighborhood and the market” is really the best answer. Most of all, real estate is about location, so it makes sense that the numbers can be different depending on the location, right?

Questions: Any insight to add or questions to ask? Or do you have any stories to share? Comments are welcome below.

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A deeper look into how the market is moving in Sacramento

We love fast things. Cars, making money, and especially information. When it comes to talking about real estate though, it’s not always possible to digest a market in Twitter-sized chunks. Today I have my BIG monthly post to recap Sacramento real estate over the past month. I hope this will be a great resource for you and your clients to get a sense of where the market is at right now. I do suggest clearing your desk for a few minutes and digging in to the post, but you can also run through it quickly by scrolling through the images.

Two ways to read this post:

  1. Briefly scan the graphs below in 1 minute.
  2. Take several minutes to digest the graphs and commentary.

Enjoy and let me know what you think.

median price and value context for sacramento county - by sacramento appraiser blog

median price average price per sq ft average sales price in sacramento county since 2013 by sacramento appraisal blog

The Median Price Scoop: The median sales price in Sacramento County is now $260,000 as of March 2014. For some perspective, current county-wide price levels are similar to early 2008 and late 2003. The median sales price saw an increase from January, which is fairly normal this time of year, though I tend to take the median price increases with a grain of salt lately since sales volume has been very low. It’s important to remember that less data points can lead to weaker sales figures, which can ultimately boost numbers. Many areas feel really soft right now to say the least, yet other areas are more stable or seeing a slight increase. Overall the market is more price sensitive as inventory is moving when it is priced correctly, but sitting when it is not. This is not a market to price a property too high or make offers like it was Q1 2013 either.

inventory since 2011 by sacramento appraisal blog

sacramento real estate market trend graph median price and inventory since 2012 by sacramento appraisal blog

The Story of Inventory: Housing inventory has been ping ponging between 2 to 2.5 months over the past quarter or so. The market is still a seller’s market since inventory is still very low (technically at 1.95 months right now). For context there were about 1200 sales last month and there are roughly 2400 active listings on MLS right now (single family detached) and close to 2600 current pending sales.

sales in sacramento - by home appraiser blog

cash sales in sacramento - by home appraiser blog

cash sales 2013 and 2014 in sacramento county - by home appraiser blog

Investors have “left the building”: Cash sales in Sacramento County have dropped by almost 14% over the past three quarters. This has been an X-factor for cooling off values and also an explanation for why sales volume has been sluggish these past months. The market was heavily driven by investors for the first half of last year, but now real estate is learning to be driven a bit more by the fundamentals (jobs & economy). Overall the market felt a bit weird to many locals over the past quarter. The number of sales was definitely lower, but the number of pending sales has been high at the same time for months. It’s been easier to get properties into contract, but not as easy to close escrow. The market is adjusting to less cash, slightly higher interest rates and more inventory. It seems the market is poised to be quasi-normal over the next few months, but the real test will be what happens the second half of the year after Spring fever subsides.

It’s worth noting cash sales under $200,000 saw an increase this quarter, but keep in mind how low sales volume has been before sounding the alarm that cash is on the rise again. As volume presumably increases over the next quarter, we’ll see how the stats adapt.

SacBiz Journal Mention: Speaking of cash, I was mentioned in a Sacramento Business Journal article two days ago, which is always an honor. Check it out at Appraiser: Decline of cash home sales doesn’t mean market is dead.

cash sales and fha sales in sacramento - by home appraiser blog

FHA sales in sacramento - by home appraiser blog

FHA and cash sales in sacramento - by home appraiser blog

FHA & Cash: One of the downfalls of less investors playing the market is a softening of values. Yet one of the most helpful byproducts is more first-time buyers and conventional buyers getting contracts accepted. Right now FHA has a similar sales volume as cash. I know I’ve had quite a few FHA appraisals come across my desk lately. Overall there has been a very slight decrease in FHA sales this quarter, but that may be attributed to escrows taking longer to close in general and FHA typically taking longer in light of needed repairs to make sure properties meet minimum FHA standards.

foreclosure in sacramento county by sacramento appraisal blog

foreclosure and short sales in sacramento county by sacramento appraisal blog

REOs & Short Sales: There has been a slight uptick in REO sales. We could say something like REOs increased by 10% last quarter, but let’s look at the numbers. There were about 25 more REOs over the past 90 days compared to the previous quarter, which is technically 10% more sales (but still only 25 sales, right?). Another way to look at the uptick would be to say we saw a 2% REO market increase from last quarter to this quarter. Of course if sales volume had not been so sluggish these past few months, we probably wouldn’t have seen any REO percentage increase at all. Ultimately this is a minor uptick, but it is something we should watch over time. Short sales have persisted to represent about 10% of the market.

sacramento real estate market trend graph interest rates since 2001 by sacramento appraisal blog

real estate trends in sacramento county - by sacramento appraiser blog

Interest Rates: After a dramatic increase of interest rates last May (3.5% to 4.0%), rates have been hovering close to the mid 4.0% range lately. On one hand increasing rates is inevitable because they simply cannot be this low forever. Yet it’s important to note The Fed previously said it would raise interest rates when unemployment was down to 6.5%. But now they are back-pedaling as the current unemployment rate is 6.7% in the United States, yet the economy is definitely not where it needs to be yet. If The Fed does continue to keep rates lower for a season, it will help continue to artificially stimulate the housing market (and economy).

sacramento real estate market trend graph unemployment 4 by sacramento appraisal blog

Unemployment rate in US CA Sacramento 2000 to 2014 - graph by Sacramento home appraiser

sacramento real estate market california united states trend graph of unemployment by sacramento appraisal blog

US, CA & Sacramento: Right now the unemployment rate in Sacramento is 8.1%, California is 8.5% and the United States is hovering at 6.7%. The economy added 192,000 jobs last month, which is seemingly good news. But at the same time critics warn many of these jobs are part-time and low paying in light of employers not wanting to hire full-time workers to pay for Obamacare. So as I always say, take unemployment figures with a grain of salt, but still be sure to look at them.

I hope this was helpful for you and your clients. Please forward or share if it was. Remember that knowing trends helps us be professional, a better resource to our contacts and even points out who are our future clients might be.

Questions: What stands out to you above? What are you seeing in the trenches of the local market? I’d really love to hear your insight. Comments are welcome below.

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Seeing Sacramento real estate in chunks

Let’s break down the market in chunks. It’s always nice to get a county-wide view of real estate, but today let’s unpack what is happening in specific price ranges in Sacramento County. I hope this will be helpful for you and your clients. When we can explain the market, we become a valuable resource and we earn people’s trust. By the way, be on the lookout for my big monthly post in two days.

1) How many properties are available at different price levels?

months of housing inventory by sacramento appraisal blog

Inventory in all of Sacramento County saw a decline from February to March as the Spring market is beginning to unfold. Housing inventory is just under 2.0 months now after being closer to 2.5 months last month. But what does inventory look like in various price ranges? As you can see, inventory is at its lowest between 200-300K, and that makes complete sense since a great bulk of buyers find this range hot and affordable (it had the most sales out of any price range). On the other and, inventory above 400K and upward really shows a dramatic increase, doesn’t it? This helps us see there are different markets within the market.

current listings vs sales in price ranges in Sacramento county - by sacramento home appraiser

Here is another way to look at inventory. You can see the number of sales in red and the number of listings in blue. Knowing the sales vs. listings ratio can open our eyes to understanding demand, marketing time, how to price properties or even how aggressive an offer might need to be.

2) How long are listings take to sell?

days on market for sacramento sales in march 2014 - by sacramento appraisal blog

On average listings are taking about 40 days to sell (or 45 days cumulative). This is about 20% longer than they were taking last year during the same time, but we all know it’s a much different market this year (more on that in two days).

3) What is happening with sales volume?

sacramento real estate market trend graph houses sold since 2008 by sacramento appraisal blog

Sales volume is definitely down from last year by over 20%, but March sales were “normal” since volume increased from February to March by 25%. The market usually sees this type of increase, so in this regard the market behaved normally.

cash sales vs conventional sales in sacramento county - by home appraiser blog

Why is sales volume down? In large part it’s because of cash investors exiting the market. As you can see in the graph above, cash sales in the first quarter of 2014 were about half of what they were in 2013 during the same time period. As investors, particularly institutional investors, have taken their foot off the gas pedal, the market is definitely feeling it. Last year the market was on “steroids” so to speak, but this year the market is in withdrawal mode trying to figure out how to live without the extra layer of cash to drive the market.

Share the Graphs? If you want to share one or two of the graphs above in your newsletter or in a blog post, go for it. Please link back here and see my sharing policy so we are on the same page about what I mean by “share” (thanks).

Questions: What image resonates with you the most? Why? Should I keep breaking the market down by price range? (I’m looking for feedback)

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Breaking down price levels in Sacramento

There are markets within a market. Or in other words, just because a trend is happening in real estate at large does not mean the same trend is playing out in every single price range or area. We all know this, but sometimes it really helps to see it too. I’ll unpack that further on Tuesday when I share a stellar image of inventory levels in eight different price ranges in Sacramento County. For now enjoy a quick visual appetizer to get a glimpse of the 2300+ current listings in Sacramento. What do you see? What do you think your clients would notice?

Number of listings by price range as of April 2014 - by sacramento appraisal blog

One more thing. The NorCal Real Estate Expo was a blast on Wednesday. It was fun to mingle, meet new people and share some actionable ideas. My voice was definitely shot after teaching for four hours, but it was so worth it. Here is an impromptu pose during my real estate blogging class when I realized Heather Ostrom was snapping a pic. By the way, if you were in one of my classes, I’m around in case you want to connect or have further questions.

10172697_10203270895471334_871749089_n

Questions: Does anything stand out to you or surprise you about the graph? How might information like this be useful to clients or the general public?

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Can a fixer next door lower your property value?

Is it possible for a fixer next door to make your home worth less? Or what if the house was in okay shape, but the yard was a disaster? I asked a handful of brokers and agents in the Sacramento area to chip in their two cents on how a fixer next door can impact a home’s value.

the fixer next door

Barbara-LebrechtBarbara Lebrecht: I tell my buyers the same thing I tell my girlfriends before making a big commitment. There are some things you cannot control. Don’t marry a property and expect the neighbor to change.

Sarah-Bixby-RealtorSarah Bixby: I’ll answer this from an investor angle. First, it depends on the neighborhood. Trying to sell a 500k+ home that sits next to a deteriorating fixer would definitely affect the aesthetic appeal and therefore the marketability of the home. In other lower priced neighborhoods I feel it’s more acceptable. If only the yard is unappealing, I would pay to have it landscaped and call it a day. If the home next door is a visible fixer I would still make the purchase but would have to take marketability into consideration and give a slight price reduction to compensate for the eyesore next door, or perhaps an extra upgrade or 2 that potential buyers couldn’t live without.

Jeff-Grenz-Real-Estate-BrokerJeff Grenz: My flipper buyers had a rule to “never purchase next door to a cyclone fence” and also had me include a panorama of the adjacent homes as seen from the front walk for evaluation…. that would be “yes” from the flipper investor buyer.

Kellie-Swayne-RealtorKellie Swayne: Curb appeal is a significant piece to marketing any property. When surrounding homes appear unkempt and uncared for, buyers tend to notice. And, then they begin to worry about what kind of experience they might have living next to a home that is not well maintained. Whether buyers will pass on a house with a “fixer” next door likely depends on the overall neighborhood as well as the house that they are considering. And, how good of a fit the other pieces might be for them. I have seen buyers pass on a wonderful home because of unkempt homes nearby. And, I have seen buyers who are willing to overlook the “ugly ducklings” for the home of their dreams.

jay emerson - realtor imageJay Emerson: I’ve had buyers say “I will offer less because of the neighbor”, “I don’t want that as a neighbor”, and “I can’t see it from my kitchen (I don’t care)”. So, beauty and appeal are truly in the eye of the beholder. It also depends on the market activity; in a hot market, the neighboring homes have less of an impact. Naturally, if the fixer also has squatters or boarded windows, it’s almost certainly a “drive-by”.

Erin-StumpfErin Stumpf: Every buyer has different peeves, but I’d say the average buyer definitely has an aversion to purchasing a home that is located next door or even within a close proximity to a blighted home. This is especially the case where the home buyer is planning to live in the home they are purchasing (versus an investment property they won’t personally live in). You only get one chance to make a first impression, and if a neighboring home is not well kept, then buyers tend to make certain assumptions about the occupants of the home without taking the time to actually investigate who lives there. If they don’t care to maintain the home’s outward appearance, what is going on inside the home? Are they hoarders? Do they have 25 cats? Will they be good neighbors? Will they be friendly? Occasionally in some neighborhoods, especially ones where homes are older, certain types of deferred maintenance in neighboring properties are a little more forgivable. But most of my buyers have opted not to offer on homes next to blighted property.

Jennifer KleinJennifer Klein: So much is about the neighborhood. In some cases the quality of the home does not matter if the neighborhood is undesirable. Unfortunately, one run down home can certainly effect the perceived value of the home as a reflection of the neighborhood. One bad apple can ruin the bunch!

Final Thoughts: Thank you everyone for such insightful comments. I sincerely appreciate your expertise. As an appraiser I also pay attention to location. Just as there can be a huge price premium when a street is tree-lined, it can also be damaging when a street has a beat-up feel to it. And a property can certainly sell for less because of a fixer next door. Usually this type of negative reaction in the market to a fixer is going to be worked out on the front end of a transaction when buyers are turned off by the issue(s) and the price is lowered until someone takes a chance – as opposed to an appraiser coming in and making some sort of objective blight adjustment. Other times though without the luxury of being able to watch a property being marketed, an appraiser is going to have to consider what is nearby and take that into consideration in the final reconciliation of value. Ultimately the saying rings true. You don’t just buy a home, you buy the neighborhood.

Questions: Would you buy a house with a fixer next door? Anything to add to the conversation?

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How to work with appraisers before, during & after the inspection

Are you doing all you can to work with appraisers? The appraisal is one of the most important parts of a real estate transaction, yet many agents have a very hands-off approach when it comes to communicating with appraisers. Sure, you don’t want to pressure for a certain value, and it can be hit and miss whether the appraiser will even talk with you. But at the same time there are definitely things real estate agents can do to help communication flow, which in turn can make a huge difference in the appraised value. Enjoy some practical tips below. Anything you’d add?

prepare for appraisal inspection - image purchased and used with permission by sacramento appraisal blog - 530

BEFORE THE INSPECTION:

  • Let your seller know how intentional you are about communicating with appraisers. This will help you look good.
  • Make a great impression on appraisers. In an industry that tends to think of appraisers as a necessary inconvenience, why not stand out from the crowd? What does it look like to represent your industry well? Do that.
  • Choose to have a positive attitude about this next transaction even if your last deal didn’t go well because of the appraisal.
  • Make a written list of all upgrades to give to the appraiser (with costs). Or have your seller make the list for you. Use my information sheet format if it works for you.
  • Choose some competitive sales and listings you used to price the property. Write out any significant differences between the “comps” and the subject property at the top of each MLS sheet. You might know something important about some of these properties that isn’t obvious. Share that type of stuff because it can make a huge difference sometimes in the appraised value. Make sure your “comps” really are competitive though. This means a buyer would theoretically purchase them instead of the subject property.
  • Make arrangements for the appraiser to have access to all rooms and structures at the property.
  • Realize the appraiser may have just received this order and probably has one week to complete it.
  • Please make sure the dog is tied up (have your seller pick up the poop too).
  • Prime the meeting, “I’ll have some information for you”.  Is there anything you need from me?

Image purchased at 123rf dot com and used with permission - 14688774_s - smallerDURING THE INSPECTION:

  • Be the professional and give off a personable vibe. Be awesome.
  • Be emotionally fresh (don’t bring appraisal baggage from the last transaction)
  • Don’t rant about the last appraiser who was an idiot.
  • Say “hello” to the appraiser first before talking on your phone and returning emails.
  • You might want to ask the appraiser if it would be best to chat before the inspection begins or after the inspection. Plan to have a brief conversation.
  • Helpful statements: “Let me know if you have any questions about the property or neighborhood” or “Call me if you need anything.”
  • Share your list of potential comps and say, “Here are some sales I used to price the property.” You’re only saying “have a look at my research” instead of “Here are your comps to use”.
  • Give a written list of all upgrades and repairs made.
  • Share insider information. How many offers, showings and calls did your listing have? What were buyers attracted to about the house? What sort of feedback did you get from agents? This type of information is often useful because it’s market data for the appraiser to consider. Please be honest.
  • Share any neighborhood information you might have. Is there something you know about the street or community that impacts value (or will impact value)?
  • You can walk around with the appraiser, but don’t hover. It’s probably best to give a little space so the appraiser is not distracted. Remember too if you walk into a room first, this means the appraiser will have to wait for you to get out of the way to take a photo.
  • Point out anything you think the appraiser should know about.
  • Avoid subtle pressure statements (I hope it “appraises”, I really need this to “make value”, You shouldn’t have any trouble “meeting value”)
  • Get the appraiser’s business card.

AFTER THE INSPECTION:

  • Hope and pray the value will be okay.  :)
  • Email the appraiser to say it was nice to meet and that you are available for any further questions (remember, you got the appraiser’s business card).
  • Remember the appraiser probably has a number of days or even one week to finish the appraisal (so don’t call multiple times).
  • When the appraisal report is finished, pour yourself a cup of coffee and enjoy an enthralling read (that’s sacasm). Seriously though, as you open up an appraisal report, forget about minor clerical or spelling errors. Focus on issues that can really sway value. Is the square footage and bed/bath count correct? Does the value make sense for the neighborhood? Are the comps good substitutions for the subject property? Do adjustments make sense? Are the neighborhood boundaries correct? Was the market described correctly? (increasing, declining, stable)
  • If the value is off-base, you can use the lender’s rebuttal system to challenge the appraisal. It won’t do you much good to contact the appraiser directly, so use the lender/loan officer as a vehicle to help communicate with the appraiser. If you end up asking for a reconsideration of value, focus on critiquing comps and give the appraiser at least two other sales to consider. Try to build a case for why the value should be re-examined rather than making an emotional argument void of market support. Don’t suggest a target value either, but let your research speak for itself.

I hope this was helpful.

Questions: Anything you’d add? What have you learned about working with appraisers?

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One big reason why the market has felt sluggish

Why has sales volume been down? Let me give you a hint. It’s green, sometimes crisp, has presidential branding, swooped in to boost the real estate market for two years, and there has been less of it lately. Bingo. You guessed it. The decline of cash sales so far in 2014 is one of the big factors causing sluggish sales in the Sacramento market as a whole. Take a look below. Any thoughts?

cash sales in sacramento county 2013 and 2014 - by sacramento appraisal blog

Unpacking the Trends: Total sales volume is down by over 20% this year compared to last year, but let’s unpack a few numbers to really understand what is happening. When looking at all non-cash sales, volume in 2014 is only down by about 4% from where it was at the beginning of 2013. Granted, volume is down very significantly though from years prior to 2013, but let’s focus on these past two years. When looking at all cash sales, there are literally less than half as many during the beginning of 2013 compared to the beginning of 2014 (595 less cash sales to be precise). Having this many fewer cash deals effectively means the rest of the market has been adjusting to such a big change after a very aggressive season of cash buying. Escrows have seemed to take longer, there are more FHA offers, sellers are offering credits to buyers and inventory has naturally seen an uptick because of the lack of cash. In short, the market has been trying to figure out how to cope now that cash has normalized. Cash of course is not the only force driving values, but we are definitely feeling its absence this year. It’s simply a different market, don’t you think?

wright reportBy the way, some bathroom reading for you:

The Wright Report: This is the most exhaustive quarterly real estate report I know of in Sacramento. The latest edition covers the last half of 2013. I contributed a couple pages to the report and talked about how there was one real estate market last year, but two chapters. You can read the report online or visit Joel Wright’s site (You can DOWNLOAD directly from Slideshare, which is what I recommend).

Question: How is having less cash investors impacting the market?

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