• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Sacramento Appraisal Blog | Real Estate Appraiser

Real estate appraisals for divorce, estate settlement, loans, property tax appeal, pre-listing and more. We cover Sacramento, Placer and Yolo County. We're professional, courteous and timely.

  • About
  • Appraisals
  • Order
  • Ask Ryan
  • Areas
  • Classes
  • Press
  • Trends
  • Share
  • Contact

Crazy contracts & condos are less popular

September 22, 2020 By Ryan Lundquist 17 Comments

I have two things on my mind today. Let’s talk about condos and then some of the crazy contracts we’re seeing happen right now. Then I have lots of visuals for those who are interested.

CONDOS ARE NOT ALL THE RAGE:

It looks like condos aren’t so popular these days. During the pandemic buyers have been saying no thanks and instead focusing on homes with more space. No matter how you look at it there are fewer condo sales happening, and that’s telling. If you’re not local, what’s happening in your area?

MARKET NOT COLD: One thing I want to clarify is just because condos haven’t been as popular doesn’t mean the condo market is dull or cold. Inventory is still sparse among condos, so don’t expect to get the deal of a century. In fact, there is not an oversupply of listings among condos at this time. Inventory is really tight. 

CRAZY CONTRACTS:

It’s common these days to see the appraisal contingency removed and many buyers are even offering to pay above the appraised value (if it comes in lower than the contract price). Anyway, I’ve been getting lots of questions about this, so here are some thoughts:

1) Value is not found in the contract: The reality is value is found in the comps – not the contract. Technically the terms in the contract shouldn’t matter because the only thing that counts is comparable data. Of course I realize some appraisers are swayed by the contract, and that’s unfortunate. Ultimately if you find yourself worried about the terms, I’d recommend focusing instead on communicating well with the appraiser because the comps are the bigger factor.
 
2) Offering above the appraisal: When I see a contract that states the buyer will pay above the appraised value by a certain amount if the appraisal comes in lower, the practical part of me wonders if the buyer actually thinks it’s not worth what was offered. But since my job is to be objective, my curiosity about the buyer doesn’t mean anything for the appraisal. The bottom line is I cannot let that influence my perception of market value. Besides, offering to pay more might not be about the buyer’s perception of value at all. Instead it could be a strategy to get an offer accepted. And most of all, the comps are what matters – not what an individual buyer thinks about value.
 
3) Hiding information: I was asked recently if it would be OK to only give the appraiser the purchase contract without an addendum that had further terms. Look, I’m not a lawyer or broker, but from my perspective I’d ask that you please give the appraiser the entire contract instead of holding something back for whatever reason. In my mind when this happens it seems like the goal is to try to influence the outcome of the appraisal, and that doesn’t smell right. Let’s keep it transparent.
 
Anyway, this is a loaded topic. Lots of emotions. What are your thoughts? Any stories to share? Please do so in the comments.
 
MARKET UPDATE VIDEO: Here’s my latest market update where I unpack glowing rebound stats. Watch below (or here).
 

WAY TOO MANY VISUALS:

Here are some new visuals. You are welcome to use these in newsletters and social media with proper attribution. Scroll quickly or digest slowly.

I hope that was interesting or helpful. Thanks for being here.

Questions: What are you seeing with condos right now? What’s happening with contracts too? Anything you’d like to see change?

If you liked this post, subscribe by email (or RSS). Thanks for being here.

Share:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)

Related

Filed Under: Market Trends, Random Stuff Tagged With: aggressive market, buying during a pandemic, condos, Greater Sacramento appraisal blog, housing market in Sacramento, imbalanced market, inventory, market stats, pandemic market trends, sacramento housing stats, Sacramento Region Appraisal Blog, supply and demand, trend graphs

Reader Interactions

Comments

  1. Gary Kristensen says

    September 22, 2020 at 10:55 PM

    Interesting comparison with the condo data. I would not be surprised if there is a similar trend in our market.

    Reply
    • Ryan Lundquist says

      September 23, 2020 at 8:43 AM

      Thanks Gary. It’s fascinating to me how demand shifts in the market. Hope you are well.

      Reply
  2. Robert J. McKiernan says

    September 23, 2020 at 9:29 AM

    Ryan, As usual we so appreciate the detailed graphs. What is your opinion of comps which were negotiated above list price and appraisals were waived or cash transactions? Glad to see you are back and hopefully healthy and on the mend.
    Bob McKiernan

    Reply
    • Ryan Lundquist says

      September 23, 2020 at 9:41 AM

      Thanks so much Bob. That’s such a good question. I find when doing valuations we have to essentially appraise the comps so to speak. In other words, no matter what we always have to ask whether the comps sold at a reasonable level or not. This might seem offensive to some, but it’s how it works.

      I think of a property that sold for a lofty amount five years ago and recently sold about $500,000 less than the price back then. Theoretically this property should have been worth way more in today’s market, but the reality is it sold for too much back then. Thus when choosing comps on a nearby property years ago I shouldn’t have blindly used that $1.8M sale because it was inflated. IN other words, just because it is a closed sale doesn’t mean it’s a reasonable reflection of the market.

      The same holds true with some properties selling with appraisal waivers. If these homes are selling too high, we have to take these “comps” with a grain of salt. Thus in some cases we’re going to just not use outlier sales because they clearly sold for too much. By the way, we don’t tend to hear about properties with appraisal waivers selling for too little.

      Of course the struggle is if we get too many homes closing like this we start to wonder if it can start to inflate the market. At some point when we see many properties closing at higher levels we wonder if it can begin to pull the rest of the market up. Though if we’re only talking about one property selling for too much it’s probably best to look at that one “lone ranger” as an outlier rather than a trend.

      Reply
      • Linda says

        September 23, 2020 at 10:02 PM

        And how do we know if the comp had an appraisal waiver?

        Reply
        • Ryan Lundquist says

          September 24, 2020 at 7:02 AM

          We don’t know unless someone in the transaction lets us know. I wish there was an MLS field so we could know for certain and maybe track how many waivers are happening too.

          Reply
  3. Dana O Smith says

    September 23, 2020 at 12:11 PM

    Love it Ryan! Thanks as always.

    Reply
    • Ryan Lundquist says

      September 23, 2020 at 12:14 PM

      Thank you Dana. 🙂

      Reply
  4. Rick R. Johnson says

    September 23, 2020 at 12:46 PM

    Glad you are feeling better Ryan, thanks for all you do. Yes, keep up with the videos, your material is much appreciated.

    Reply
  5. Marla Smotherman says

    September 23, 2020 at 1:34 PM

    Ryan, we all appreciate you so much! Thank you for taking the time and effort to put out this clear but critical data at a glance.

    Reply
    • Ryan Lundquist says

      September 23, 2020 at 1:37 PM

      Thanks Marla. That’s so nice of you to say. It’s fascinating to see how different submarkets are performing right now.

      Reply
  6. Michelle Lehman says

    September 23, 2020 at 3:19 PM

    Thanks Ryan! Happy to see you back at work and sharing your insights! You have been in our prayers.

    Reply
    • Ryan Lundquist says

      September 23, 2020 at 3:45 PM

      Thank you very much Michelle. I’ve benefited greatly from your prayers and others. I’m so incredibly thankful.

      Reply
      • linda wood says

        September 23, 2020 at 6:49 PM

        I’m so happy to see you back at work, you must be feeling much better!

        Reply
        • Ryan Lundquist says

          September 24, 2020 at 7:01 AM

          Thank you so much Linda. I am so much better than I was. I feel well overall. I’m just glad to be back to work.

          Reply
  7. Camelia Vera says

    September 24, 2020 at 9:21 AM

    I respectfully beg to differ on your definition of the value of a property. When my clients offer to pay the difference between the appraised price and sales price, it’s because they feel given the inventory out there, it’s worth the sales price to them. The appraisal is for the lender’s value. Its not really an indicator of the buyer’s value (price willing to pay) in a sellers market. But I do respect your take on it because your value is for a different purpose which is, to protect the lender.

    Reply
    • Ryan Lundquist says

      September 24, 2020 at 9:33 AM

      Thanks. I appreciate your take and tone here. I don’t know that we are actually saying something different because there are two definitions to consider. I highlighted one of them and you highlighted the other. There is market value, which is what most buyers are willing to pay. I’ve included Fannie Mae’s definition below. But there is also such a thing as value to an individual buyer. Someone might think a property is worth it to them and pay more for whatever reason and this price may or may not represent market value. I think we see this show up quite a bit. Maybe a family member needs to buy that home next to Mom’s house, so they’ll pay more than others would. Or maybe we have a really tight market and a buyer is willing to pay above what is reasonable to others. Or maybe a buyer is doing a 1031 exchange and he/she need to pay more to get the deal done because of a pressing timeline. In short, I think what I’ve said and you said actually fit together when we consider both these realities. Or maybe my tea isn’t working well yet this morning…

      Fannie Mae’s Definition of Market Value: Market value is the most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus.

      Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

Connect with Ryan

 Facebook Twitter LinkedIn YouTube Instagram

Subscribe to Weekly Post

* indicates required

Search this site

Blog Categories

  • Appraisal Stuff (407)
  • Bankruptcy (3)
  • Divorce (4)
  • Estate Settlement (6)
  • FHA Appraisal Articles (56)
  • Internet (53)
  • Market Trends (476)
  • Photos from the Field (126)
  • Property Taxes (70)
  • Random Stuff (231)
  • Resources (566)
  • Videos (161)

Blog Archives: 2009 – 2021

Lundquist Appraisal Links

  • Appraisal Order Form
  • Appraisal Website
  • Rancho Cordova Appraiser Website
  • Sacramento Appraisal Blog Sitemap
  • Sacramento Real Estate Appraiser Facebook Page
  • Twitter: Sacramento Appraiser (@SacAppraiser)
  • YouTube: Sacramento Appraiser Channel

Most Recent Posts

  • My new sewer line adds huge value, right?
  • The housing market nobody predicted
  • Real estate trends to watch in 2021
  • You carried me & a spreadsheet for Christmas
  • Real estate drama (and a market update)
  • Goodbye California. Is everyone leaving?
  • How much are buyers paying above the list price?
  • What would happen to the housing market if we went on lockdown again?
  • Overpricing, multiple offers, & hot ranges
  • Why your home isn’t worth 16% more today

Disclaimer

First off, thank you for being here. Now let's get into the fine print. The material and information contained on this website is the copyrighted property of Ryan Lundquist and Lundquist Appraisal Company. Content on this website may not be reproduced or republished without prior written permission from Ryan Lundquist.

Please see my Sharing Policy on the navigation bar if you are interested in sharing portions of any content on this blog.

The information on this website is meant entirely for educational purposes and is not intended in any way to support an opinion of value for your appraisal needs or any sort of value conclusion for a loan, litigation, tax appeal or any other potential real estate or non-real estate purpose. The material found on this website is meant for casual reading only and is not intended for use in a court of law or any other legal use. Ryan will not appear in court in any capacity based on any information posted here. For more detailed market analysis to be used for an appraisal report or any appraisal-related purpose or valuation consulting, please contact Ryan at 916-595-3735 for more information.

There are no affiliate links on this blog, but there are three advertisements. Please do your homework before doing business with any advertisers as advertisements are not affiliated with this blog in any way. Two ads are located on the sidebar and one is at the bottom of each post. The ads earn a minor amount of revenue and are a simple reward for providing consistent original content to readers. If you think the ads interfere with your blog experience or the integrity of the blog somehow, let me know. I'm always open to feedback. Thank you again for being here.

Copyright © 2021 Sacramento Appraisal Blog