The BIGGEST change is in appraisals. After interviewing several appraisers and lenders, I have come to learn that the government has taken over the appraisal industry. The government has capped the amount of money an appraiser can make, cutting their income drastically. The government has called this take over "HVCC" and I will provide a link to give you more information. Welcome to My TBWS Page Request For Reconsideration of HVCC This law states that lenders may not ever contact their local appraisers for any reason...even if there is a problem. If the lender wants an appraisal done, he submits it to this giant website and it becomes a "job" available to any appraiser anywhere. Appraisers are also terrified of not pleasing the banks and being taken off their "approved panel" list. So, with the appraisers not making much money and having no incentive except for pleasing the banks, this is what is happening:
1) Appraisers are coming to appraise West Torrance homes from Rowland Heights, Bakersfield, San Clemente and San Fernando Valley. They have no knowledge of the area and they don't care. (Remember, the government just took over their job and told them what they can earn.)
2) Appraisers are bringing value in, across the board, 10% below value to please the banks and stay on their good list. They are not using appropriate comps (comparing a house on Anza to a house on Laurette) and ignoring the correct comps.
3) Our best appraisers are looking to get out of the business.
How does this affect you if you are in escrow: Let's say you sold your house for $600,000 with a solid 20% down payment from the buyer. Now the appraisal comes in at $540,000 (10% reduction). Now the bank will only loan 80% of $540,000 instead of 80% of $600,000. The bank will only lend $432,000 instead of $480,000. This makes a gap of $48,000 that either the buyer has to make up with cash, or, the seller has to come down in price in order to close this escrow.
In selling my last 6 West High houses this year, I have experienced the following "fall out":
1) Some unscrupulous people (buyers and agents) have intentionally offered higher sales prices in order to tie up the property in escrow knowing the appraisal won't come in for what they offered to pay for the house. Then, they try to "bully" the seller down on their price in escrow.
In order to avoid this, I have been asking for appraisal contingencies to be removed on all offers.
I "lost" 8 offers on 4835 Halison because of asking for the buyer to remove the appraisal contingency and stick to their original sales price they promised the seller they would pay for the house. 8 buyers walked away!!! Holding out for the right buyer paid off, because, the 9th buyer had 37% down (ability to handle appraisal coming in low) met our price and removed the appraisal contingency! The buyer satisfied themselves by looking at the recent sales. And, needless to say, my seller is very happy that we will close the escrow without getting beat up on the price in the middle of the escrow.
Is there a moral to this story? Yes! As I have said for 24 years....Banks, Agents, Zillow, Twitter...whatever, doesn't set PROPERTY VALUE!! Buyers and Sellers do!!
Now, for the good news: The buyers mind has changed!!! They want to buy and know this is a great time to do it! So, we have lots and lots of excited people out there looking for a house.
Now, can these buyers get a loan? Well, it is very simple. They can have one of two loans. That's it. Very, very, simple. They can have an FHA loan (or VA loan) or put 20% down. Don't fret. There is ALOT of money out there. Many people have been sitting on it waiting for the market to drop.
On the flip side, there is a huge section of the market that cannot get loans now. This cuts into available people able to make offers on your house.
It is still very tough for self-employed people to get a loan right now. I am staying on top of it and will know as soon as a good loan product comes out for us hard working, self-employed folks.
Prices are NOT going up at this writing. In fact, they have slipped about 3% in our West High Area. Foreclosures and short sales are still rearing their ugly heads and keeping prices stagnant or slightly dipping. (Yes, we have foreclosures in West High, just much smaller percentage than other areas.)
Prime properties (great locations, cosmetically appealing) are getting multiple offers, but, it is amazing that these offers are not bidding the price up - very little at most.
My Chrystal Ball says, "Get an experienced agent with a good reputation to navigate this new real estate world." Call me today to help you on your next real estate decision!
Lynda McDonough, 310-560-3774
