Uh – oh some appraisals are low!
As we enter the spring market I have growing concerns over appraisals here in Northern Virginia. As we come out of the “slower” winter months, appraisers have fewer homes to choose from to help catch them up with the market today. We are seeing 20-30 people regularly at open houses which is rare for this time of year. There are only 3,081 houses for sale in all of Northern Virginia – a true supply issue for the number of buyers in the marketplace. As a result, it is rare not to see multiple offers on houses listed today. This is not an artificial “run up” of housing prices and we are not stretching prices as we are still below the highs of the housing bubble in many areas. The law of supply and demand should dictate property values in my opinion.
Here are examples of the last few appraisals we have come across. Two single family homes in the same neighborhood in Fairfax both recently came in low – one was sold at $850,000 and appraised for $847,000 – really? The other one sold at $877,000 and appraised for $811,000. How can these numbers be so far off from each other and where is the real estate
market headed today? One of our agents listed a town house in Countryside for $320,000. They received 3 contracts in the first weekend – an obvious issue of supply and demand. Well, it sold for $326,500 and appraised for $300,000. The appraiser used a short sale that had closed several months prior to this sale at $260,000 as a comparable. Short sales are less than 8% of the market plus if it closed several months prior to this sale, because of the short sale process, the contract was written several months prior to closing – how is this truly a reflection of the market today? We also had an offer come in on a town house in Centreville recently which sold for $450,000 and appraised at $435,000. The appraiser used a new town house in a community down the street that settled in July of 2012. Again, as it was new build, the contract was written a few, if not several months prior to the settlement – is this a true indication of market value today? What’s worse is there was a closing in the same neighborhood which was a higher value that settled in December that was not used to support the price of our town house. Lastly, we had a condo in Sterling that came in low by $8,000. The sales price was $175,000 and it appraised for $167,000. I think you can understand our issue.
What can be done? First, provide information to your sellers and buyers early. Set the expectation that the property may not appraise for the sales price and discuss the potential options with them so they understand what the next steps would be for them. Let them know that the appraisers may have difficulty finding suitable comparable sales – this is where you must be diligent and provide solid comparable sales to the appraiser. If you are dealing with an FHA appraisal and the sellers of comparable properties paid closing costs for their buyers, let them know the appraiser will take that amount off the top of the sales price which could bring down your value. As there are many multiple offer situations, some buyer’s agents are putting in high offers to get an approved contract knowing they won’t get the needed appraised amount – let your sellers know this is the case and the highest price is not always the best offer. If you are selling a new home, most builder contracts do not have appraisal contingencies in them for their protection, not the buyers. As prices of new homes are escalating this becomes a concern for buyers today. Remind them that an appraisal is a snap shot in time based upon historical data that is already behind our escalating market.
In addition to providing information to your sellers and buyers, provide extensive details to the appraiser. Plus, don’t just provide them with information, meet them and discuss what you and they are seeing in the market – build rapport by sharing your stories and listening to theirs. Share with them your comparable sales and why they should be considered. Explain the Home Pricing Wizard to them in detail and how it helped you determine the market value. Provide them with copies of the competing offers so they can see it is a desirable property. Share with them your feedback from Showing Suite that shows other agents that visited the property how they felt the property was priced at market value – or below. Bring market data from RBIntel that shows the market is increasing in value, as well as, articles that point to this fact. You must be diligent in your representation of our clients and do all you can to get the houses to appraise.
The good news is not all properties are appraising low, but there are enough that are, so this is why you need to pay attention and educate our clients on what is happening in the market. This separates you from other agents and makes you a professional. Get it? Got it? Good!
Now, go sell something!
market update
Scott’s Real Estate Market Update for Northern Virginia
Scott MacDonald’s Market Minute Update offers a quick look into the current real estate market conditions for Northern Virginia, the here and now of what is going on in the Virginia side of the DC Metro housing market area. The real estate market is favoring Sellers as Buyers in need of homes have fewer to choose from; multiple offers have been recently noted on homes listed and priced at competitive market value. If you are looking to buy or sell, give Scott MacDonald a call 703-652-5777
Agent Success: Professional Courtesy
As the Spring market begins and Real Estate Agents are showing and listing more properties, Scott MacDonald offers a few tips and reminders when showing properties. Want to learn more about the REMAX Gateway? or contact Scott MacDonald directly at (703) 652-5777 scottymacsblog.com
REMAX Gateway Agents Training for Anticipated New Home Sales
This year the real estate market trend will shift to incorporate more new home construction sales as we are seeing fewer resale properties on the market. Inventory levels of resale existing homes were down as much as 30% throughout 2012 in NOVA. So we brought in the new home sales expert Suzanne Neff to educate our agents on how to be more successful in selling new homes and how to add more value as an agent in the new home sales process.
We also heard from Leslie Strittmatter with New Homes Guide . They provide a list of all new homes in an easy to use directory. If you don’t see a builder you know, just let Leslie know as this is a free service to the builder.
Suzanne offered us some very practical and insightful information that I would like to share with you:
- Be wary of registration policies – every builder is different, time of registration & period, must be present upon registration.
- Remember: 1st agent in – is their agent
- Preview the new home – just like a resale
- Ask to see entire agreement in advance of writing contract and review with the client prior to writing the contract.
- Prior to writing contract talk with sales person about the negotiating position of the builder. It is important to know all the facts.
- Ask about communication process of sales person – how often, with whom, etc.
Did you know … There are differences in builder’s contracts – builders add paragraphs when something happens in the past, deposits (flat fee, %, at contract writing, at selection time), no appraisal contingencies allowed, sometimes deposit on contingent contracts it is not refundable, days to make color selection – loan application, loan approval, etc., notice to close 2 days to 2 weeks.
Did you know … Some builders have in house mortgage/title with credit back for closing/options/etc. (have client get GFE to compare to your lender to see if builder will match) – do a chart to show what the breakeven time-frame would be for them to “not” use the builder contract. Often times, it is more difficult for the outside lender to work with the title company and vice versa. Builder likes control.
Did you know … Keep client in property 2 weeks past closing because it is your responsibility to keep a roof over their head – not the builders. Permit process may delay closing, weather may delay closing. Never schedule back to back moves.
Did you know … Get a copy of the contract at contract writing or you may not get one for over 30 days.
Did you know … Many contracts say- products/offerings are subject to change without notice and builder has the ability to switch out products of similar quality – make your buyers aware of this clause so there are no surprises. Shortages may occur as factories are not ready for increase in sales. Prices – hello, the market is hot and manufacturers may raise their prices and builder may switch manufacturers.
Did you know … You need to ask how many inspections are there and which ones can we, as agents, attend and which ones can the buyer attend.
Did you know ... Most builders will want the home inspector there before or after scheduled walk through. Some will want you to use their approve inspectors.
Did you know… Most builders want to build a product they are proud of and will stand behind their product. Most every builder will have a form that “waives their right to warranties” because they, the builder, will offer a better warranty than what is required by Virginia and often times, the vendors they use give longer warranties than what the state requires.
Have you ever considered “why do people like being new home sales agent?” This is good to think about just so you know the basic type of personality you may be potentially working with throughout the sales process:
They like to sell; they also strongly desire and rely on support of administration staff; they typically like to know where they are going everyday; a salary and/or draw is often part of their compensation; they typically participate in health care benefits that the builder potentially offers; sales commission structures differ between builders but obviously, the more they sell, the more they earn; two days off with 40+ hours a week – days off vary during the week (so be sure to call and find out their schedule because not all assistants know the neighborhood, offerings, etc.); and new home sale persons must be ready to sell at any time because you/your client may be the only person they see all week – this is another reason why it is so important to call ahead, so you can get the data and let them sell their product when you bring your client in.
Suzanne strongly suggests taking the time to call before taking your client in to the sales office. This introductory conversation shows your level of professionalism to the new home sales person, and even more importantly, the information you provide to your client shows them that you are doing exactly what you promised: helping them find a home and representing them in their purchase of their new home.
Here are some great questions to ask the sales person:
- What is the Registration policy?
- How much will Agent be paid?
- What is the commission percentage based on?
- What are their hours?
- When is the sales person available?
- What is available?
- What is price range?
- What is average sales price?
- What is building time frame/delivery time?
- Are there any buyer incentives being offered by the builder?
- Do you know of any price increases in the near future?
- Convey something about your clients and background of their move.
Kevin Harris is an award-winning residential architect, international speaker, champion of culture-based design, an LSU and Harvard GSD graduate, father of 3, Eagle Scout, blue water sailor and Fellow of the AIA. For more information on Kevin or the firm go to http://www.kevinharrisarchitect.com.
Remember this is an emotional time, so be sure to be there for your clients.
As market continues to move in the builder’s favor, negotiations on pricing and incentives for mortgages using mortgage and title partners will be less, credits for upgrades go away, and in some cases, deposits will become non-refundable. Be sure to be a professional Realtor and know more so you can earn the trust and respect of your clients and the new home sales professionals. Get it? Got it? Good!
Now, go sell something!
Scott’s Market Minute for Northern Virginia
Just two weeks into the new year and so much to consider with the real estate market!
Prediction #1 Scott MacDonald TOP 10 Predictions 2013
Scott MacDonald counts down his 2013 Top 10 Predictions for Northern Virginia Real Estate PREDICTION #1 the Real Estate Market & exciting news for REMAX Gateway in 2013.
Prediction #3 Scott MacDonald TOP 10 Predictions 2013
Scott MacDonald counts down his 2013 Top 10 Predictions for Northern Virginia Real Estate PREDICTION #3 Lending Guidelines, Mortgages, and Lenders affect on Housing Market projection for 2013.
Prediction #5 Scott MacDonald TOP 10 Predictions 2013
Scott MacDonald counts down his 2013 Top 10 Preditions for Northern Virginia Real Estate PREDICTION #5 Resale Residential Housing Market projection for 2013.
Prediction #6 Scott MacDonald TOP 10 Predictions 2013
Scott MacDonald counts down his 2013 Top 10 Preditions for Northern Virginia Real Estate PREDICTION #6 Short Sale & Distressed Properties projection for 2013. scottymacsblog.com
RE/MAX Gateway Economic Conference & Real Estate Market Update
We had the honor of having Dr. Stephen Fuller from George Mason’s Center for Regional Analysis at our Quarterly Meeting. During our time together, we discussed several topics which are covered below:
Our conversation began with the recent article Dr. Fuller was featured in the Washington Business Journal article in which the headline read; “Sage or shill”. The article discussed his position on development throughout Northern Virginia over the years and how he is revered by many and unliked by some. It brought to light his perspective on bringing to the table the developer’s opinions and reasoning for bringing Metro to Loudoun. It took into account the long term economic effects on the county “with or without” the expansion of the Metro into Loudon. Essentially, it comes down to an estimated 40,000 job difference, the economic consequences over 30 years, and the difference as to the growth being that of office space or shopping centers. Office space brings higher paying jobs, more educated residents and the county tax base is better off as a result of the Metro. It also covered his conversation which may have swung a Board of Supervisor’s vote when he spoke with one of their assistants at a Fairfax Chamber of Commerce event. He recalled as he sat in among other Fairfax Chamber meeting attendees this fall, he happened to sit beside an assistant of an Administration Supervisors and had a very brief discussion with the fellow. When Dr. Fuller asked what his Supervisor thought -the response from the assistant was that he ‘was not for it’. Dr. Fuller simply asked -and you? The assistant considered it a ‘no brainer’. Some thought this was Dr. Fuller lobbying for the Metro, as the Supervisor would have a ‘vote’. Dr. Fuller said he often will discuss things he feels important like cookies, and thus the reason cookies were served at today’s meeting.
Dr. Stephen Fuller & Scott MacDonald at the RE/MAX Gateway 3rd Quarter 2012 Meeting
There was an Economic Summit last week at the National Conference Center which was mainly about Loudoun County and the developers were mixed on Class A office space – one optimistic, one not, one in the middle – in all of NOVA, where do you see the Class A office market heading? You can’t chance a county’s economic growth by just one type of use, like a strip mall. Class A is based on mobile access. As the economy shifts from a 40% federal dependency, NOVA is positioned to become a global business center, much like Tokyo or London. Western Fairfax and Loudon will be seen as a “regional labor shed”. When businesses ask themselves, “Where should I be?” the response will most likely be, tied to the Metro. The Metro expansion through Tyson’s, Reston and out to Loudoun will position this region for Class A space and job growth as a result.
In the past you have mentioned and actually may mention it today that we are expecting 1 million new jobs in our area. As a result, more housing will need to be built to accommodate the increase in employment – where do you see the new homes being built with Loudoun’s zoning issues as well as Fauquier’s view on no growth? We will see higher density in the areas where development is already approved for housing – especially near Metro stops and give a more urban feel to those areas.
I know you have slides that are going to tell us downside and upside of the fiscal cliff and sequestration but based upon what you hear, read and discuss with others, what do feel is really going to happen?
With regard to the economic ‘fiscal-cliff’, it is like NASCAR we are going around in circles under a yellow flag. When it all gets resolved – there will be give and take – the green flag will wave, there will be debris on the track but we will see growth in the economy.
It has been said and is in your slide later that Virginia will lose 207,000 jobs – what will the number be in NOVA? Where will our unemployment be at that time? NOVA is generating more jobs in spite of a slower federal growth. An estimated 24,000 Federal job loss in 2015 by 2020 this will equate to a stronger economy in the private sector and less government-based jobs so sequestration may not be a bad thing for our region from a long term perspective. If total sequestration occurs, which I don’t believe it will, there will be compromises made, Northern Virginia will see 75% of these jobs lost.
Real estate has always been a stable investment option (when compared to the stock market) and a lot of investors have entered the real estate market, what do you believe is the Outlook for 2013? Will people continue to invest? What is the window of opportunity for investors? Rental market will be strong. There will be a large influx of the 25-35 year olds and they are not in a hurry to buy. There will be a temporary backlash of the perception as to the 2005 market and it will be seen that purchasing a home is ‘not a good investment”. We will see a pent-up need in 2015/2016.
What is your opinion on mortgage interest rates – how long with they stay low? Interest rates will stay around 4% for 30 year fixed rates for 2013/2014; they will rise to 5% in 2015. Money will shift globally as the Asian market ramps up and Europe recovers. In the next six months: Republicans will give in; There will be revisions in Social Security and Medicare; Things will tighten up in the financing arena; Incentives will fade out over the next two years with regard to payroll tax and other taxes incentives. With regard to the economic ‘cliff’, it is like NASCAR and we are in a ‘yellow flag’ economy – eventually the green flag will wave and the economy will take off.
Do you have any ideas on what the future of the GSE’s will be? Who will be the next player in the mortgage market if GSE’s are phased out? When would phase out occur and how long will it take to accomplish? The GSE’s may merge into one entity. The market needs a government backstop with some type of guarantee so they will not entirely go away.
How about MID? What is the future? There will be a cap for mortgage interest deduction. There is currently a cap in place it will just be reduced and it will probably be to $250,000 in deductibility.
Mortgage debt relief, will it make the fiscal cut and why or why not? Distressed properties nationwide will continue to decrease and therefore some type of program will need to be in place. It won’t happen right away as Congress will have to re-evaluate. Something will be put in place and in all likelihood it will be retroactive to the beginning of the year?
How will these areas affect housing and our market in the future? There won’t be much of an impact because of job growth over the next 20 years, lack of inventory, no spec building by builders and low interest rates for the next few years.
Scott's Motivation and Real Estate Market Updates 