Hidden Problem Keeps Housing Prices Low
RICHARDSON (CBS 11 NEWS) – Even in a down market, Brock Hardman had no worries about selling his Richardson home. It had a clean, white-column colonial style. It was in one of those neighborhoods where buyers scour the new listings in the weekend paper, hoping to beat others to the punch. After just 11 days, he had an offer, and he took it. Then someone took it away.
“I was pretty shocked to know that in a market that a buyer and seller agree on price that a third party could come in and dictate what something should be sold at,” Hardman said.
Just before closing the lender’s appraiser valued the home a full $20,000 less than the agreed upon price. Hardman didn’t want to say exactly what words he used when he heard that. He had two choices, come down in price, or lose the sale. He was already paying a mortgage on the home he was moving to near Sachse, so it wasn’t much of a choice. He took the hit.
It’s a story that sellers, realtors and builders continue to run into as the housing market climbs. Sales in North Texas were up 18-percent in August over last year. Prices climbed eight-percent, according to Texas A&M University’s Real Estate Center. Appraisers though are not always climbing with the market.
While some realtors told CBS11 the problem may not be widespread, Van Poole Properties in Plano said it’s had problems from Plano to Garland. Value differences have ranged from as little as $2,000, to Hardman’s $20,000.
Sean Knight who builds custom homes said he had a property with a $50,000 difference. On a new home, he can get rid of amenities to try to come down in price. Most often, he said, the problem comes up when there have been no other new homes in the neighborhood in years. Appraisers have nothing to compare to and justify a new home price.
Kristen LeForce, who often ends up trying to save the sale at Van Poole, went further, suggesting appraisers may be afraid to push limits following the housing crash. However, she said, that in turn could handcuff the market from coming back sooner.
“It’s definitely slowing the market down in that you have a willing buyer and a willing seller that are wanting to pay a price, raise the neighborhood, help the comparables, and then it gets shot down.”
Among appraisers though, many of whom are hesitant to talk about the conflict, it often boils down to a simple case of different understandings of market value. Joe McKissack said all he’s doing is reporting what’s happening in the market. That market still includes foreclosed and devalued homes, a few examples of recent sales. That does little he said to support higher selling prices that realtors often reach for.
Occasionally appraisers blame their own industry for the problem. New rules designed to ensure impartial appraisal practices sometimes mean the job now goes to the person with the lowest fee rather than local knowledge. Greg White said geographic incompetency becomes a problem, when appraisers from out of town don’t understand the intricacies of a neighborhood.
Both realtors and appraisers said as more sales do get through, the problem should start to lessen. There are already signs brokers said. Fewer low appraisals have been reported since the North Texas housing market picked up this summer. Some are still recommending pre-appraisals though for sellers, just to avoid any sticker shock at the end.
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