The North County San Diego real estate market is experiencing higher home prices, as inventory remains restricted through the summer months. One new challenge for both buyer and seller in today's market is the appraisal value of the property.
Appraisal values in North County remain conservative and are slow to catch up with the current marketplace. The challenge is not only a local phenomenon. Low mortgage rates and lower prices have created strong incentive to buy a home in today's market. The current monthly costs of homeownership are historically low and comparatively affordable to renting a similar home.
In North County San Diego, the summer market often sees the greatest number of contracts signed during the calendar year. Roughly 30 percent more homes will sell in the peak summer months than during the winter.
However, while more homes typically come on the market in the spring, this year the number of available homes for-sale went down and it has stayed down. As a result, the total number of home sales remain low. A low number of sales amidst high buyer demand will create two distinct challenges for an accurate appraisal.
First challenge: rapidly changing values.
As the number of for-sale homes remain low, home buyers have fewer choices and are having to wait longer to find a suitable home. When a home becomes available, it often has a high level of interest from multiple qualified buyers. Multiple-offer scenarios are becoming more common, as many North County real estate brokers will confirm.
After months of searching, today's buyers are becoming more aggressive to secure a home; even if that means offering more than recent sales. This will cause today's contract prices to often reflect a higher value than those from only a few months back.
Today's conservative appraisals act as a stopgap of protection for the bank who typically will loan a majority of the money on a real estate purchase. But a conservative appraisal can also not keep pace with a rapidly changing real estate market.
Second challenge: finding relevant comparable sales.
As fewer homes are sold, there are fewer direct comparable homes for appraisers to use to justify the value of today's contract. Many neighborhoods have little to no for-sale activity. As appraisers are often restricted to sold comparables of only the past 90 days, they are having to broaden their search and draw value conclusions that may be inaccurate.
Since foreclosure homes have been replaced by the 'short-sale' home in the past 12 months, finding relevant comparable sales is ever more difficult.
Short-sales have become nearly 50 percent of the currently available homes for sale in North County. Foreclosures have been reduced down to roughly 5 percent of the active inventory from over 30 percent in 2011. Even with new agreements by the nation's largest banks to expedite the short-sale approval process, short-sale transactions will typically take 90-120 days to close escrow.
In an upward moving market, the contract price of a sale made 120 days ago is not relevant to today's market. However, that short-sale will close and create a comparative sale that both buyers and appraisers will use to assess value.
Depending on your vantage point, a conservative appraisal is either a blessing or a curse.
For those selling a home with unique amenities or top market upgrades, the appraisal can make it difficult for you to achieve full market value. If the appraised value comes in lower than contract price, the home buyer will often balk at paying the agreed upon price.
Buyer's agents often head back to the negotiating table with the listing agent to restructure terms of the deal. Reappraisals or 'value disputes' that challenge a low appraisal with the hope of getting it closer to contract, are coming up short.
A successful 'value dispute' often requires new, relevant comparative sales. A difficult task given today's marketplace. Buyers should see low appraisals as a gift that will, for at least the near term, keep a lid on rising home values until the North County real estate market sees more available homes.
Top 5 Homebuyer To-Do's
The tempo of today's real estate market is fast, requiring agents and buyers to move quickly to secure a desirable home. Buyers are prone to make hurried decisions, exposing them to a less-than-desired result. Here are five steps to be a better buyer in today's North County real estate market.
1. Get prequalified. An old adage that remains true today. A serious buyer will take the time to secure a pre-qualification letter from a mortgage bank or broker prior to looking at homes. Many high income earning professionals are surprised on their qualification status given today's stricter lending environment. You will not only be able to determine the price range of your search, but be able to address any challenges in regards to credit, income or documentation.
2. A detailed self assessment. Decide what is important to you and/or your family. Develop a 'want' list and a 'needs' list. Talk with a professional about neighborhoods that might fit your criteria. An experienced professional can you create a plan with realistic goals. You may not be able to get a 4 bedroom home in walking distance to the beach for under $500,000. But maybe a 3 bedroom within a half-mile.
3. Remain flexible in your time frame. With fewer homes available for purchase be prepared to wait longer to find the home that best fits your needs. It is becoming more common for qualified buyers to wait 6 or 9 months to find the right home. Having a flexible interim housing option will relieve unnecessary pressure on an already stressful process.
4. Don't get hung up on past comparative sales. The market is moving away from past sales in an upward trend. Some buyers will become fixated on a single comparative sale that happened last year; a sale that is no longer considered relevant given the current marketplace. And in the process miss out on many other valuable homes.
5. Know what you're buying. A detailed exterior and interior inspection of the property during your showing can help you minimize any 'oh I have to repair that' during escrow. In a competitive market, many buyers are not given much time to consider all aspects of the home. And only once they get into escrow they find the home needs a new roof, extensive termite repair or a new heating system. It is often more difficult to change contract terms 'in-escrow' than come upon an agreement at the onset. , By Tyson Lund
Appraisal values in North County remain conservative and are slow to catch up with the current marketplace. The challenge is not only a local phenomenon. Low mortgage rates and lower prices have created strong incentive to buy a home in today's market. The current monthly costs of homeownership are historically low and comparatively affordable to renting a similar home.
In North County San Diego, the summer market often sees the greatest number of contracts signed during the calendar year. Roughly 30 percent more homes will sell in the peak summer months than during the winter.
However, while more homes typically come on the market in the spring, this year the number of available homes for-sale went down and it has stayed down. As a result, the total number of home sales remain low. A low number of sales amidst high buyer demand will create two distinct challenges for an accurate appraisal.
First challenge: rapidly changing values.
As the number of for-sale homes remain low, home buyers have fewer choices and are having to wait longer to find a suitable home. When a home becomes available, it often has a high level of interest from multiple qualified buyers. Multiple-offer scenarios are becoming more common, as many North County real estate brokers will confirm.
After months of searching, today's buyers are becoming more aggressive to secure a home; even if that means offering more than recent sales. This will cause today's contract prices to often reflect a higher value than those from only a few months back.
Today's conservative appraisals act as a stopgap of protection for the bank who typically will loan a majority of the money on a real estate purchase. But a conservative appraisal can also not keep pace with a rapidly changing real estate market.
Second challenge: finding relevant comparable sales.
As fewer homes are sold, there are fewer direct comparable homes for appraisers to use to justify the value of today's contract. Many neighborhoods have little to no for-sale activity. As appraisers are often restricted to sold comparables of only the past 90 days, they are having to broaden their search and draw value conclusions that may be inaccurate.
Since foreclosure homes have been replaced by the 'short-sale' home in the past 12 months, finding relevant comparable sales is ever more difficult.
Short-sales have become nearly 50 percent of the currently available homes for sale in North County. Foreclosures have been reduced down to roughly 5 percent of the active inventory from over 30 percent in 2011. Even with new agreements by the nation's largest banks to expedite the short-sale approval process, short-sale transactions will typically take 90-120 days to close escrow.
In an upward moving market, the contract price of a sale made 120 days ago is not relevant to today's market. However, that short-sale will close and create a comparative sale that both buyers and appraisers will use to assess value.
Depending on your vantage point, a conservative appraisal is either a blessing or a curse.
For those selling a home with unique amenities or top market upgrades, the appraisal can make it difficult for you to achieve full market value. If the appraised value comes in lower than contract price, the home buyer will often balk at paying the agreed upon price.
Buyer's agents often head back to the negotiating table with the listing agent to restructure terms of the deal. Reappraisals or 'value disputes' that challenge a low appraisal with the hope of getting it closer to contract, are coming up short.
A successful 'value dispute' often requires new, relevant comparative sales. A difficult task given today's marketplace. Buyers should see low appraisals as a gift that will, for at least the near term, keep a lid on rising home values until the North County real estate market sees more available homes.
Top 5 Homebuyer To-Do's
The tempo of today's real estate market is fast, requiring agents and buyers to move quickly to secure a desirable home. Buyers are prone to make hurried decisions, exposing them to a less-than-desired result. Here are five steps to be a better buyer in today's North County real estate market.
1. Get prequalified. An old adage that remains true today. A serious buyer will take the time to secure a pre-qualification letter from a mortgage bank or broker prior to looking at homes. Many high income earning professionals are surprised on their qualification status given today's stricter lending environment. You will not only be able to determine the price range of your search, but be able to address any challenges in regards to credit, income or documentation.
2. A detailed self assessment. Decide what is important to you and/or your family. Develop a 'want' list and a 'needs' list. Talk with a professional about neighborhoods that might fit your criteria. An experienced professional can you create a plan with realistic goals. You may not be able to get a 4 bedroom home in walking distance to the beach for under $500,000. But maybe a 3 bedroom within a half-mile.
3. Remain flexible in your time frame. With fewer homes available for purchase be prepared to wait longer to find the home that best fits your needs. It is becoming more common for qualified buyers to wait 6 or 9 months to find the right home. Having a flexible interim housing option will relieve unnecessary pressure on an already stressful process.
4. Don't get hung up on past comparative sales. The market is moving away from past sales in an upward trend. Some buyers will become fixated on a single comparative sale that happened last year; a sale that is no longer considered relevant given the current marketplace. And in the process miss out on many other valuable homes.
5. Know what you're buying. A detailed exterior and interior inspection of the property during your showing can help you minimize any 'oh I have to repair that' during escrow. In a competitive market, many buyers are not given much time to consider all aspects of the home. And only once they get into escrow they find the home needs a new roof, extensive termite repair or a new heating system. It is often more difficult to change contract terms 'in-escrow' than come upon an agreement at the onset. , By Tyson Lund