Challenging a mortgage appraisal

Challenging the results of the appraisal for mortgage financing

The first thing to remember as a consumer or real estate agent, is that the client is the lender, not the consumer. Even though the consumer may pay for the appraisal, they are no more the client than is the credit reporting agency or title company hired directly by the lender.

The lender obtains the appraisal to ensure that the collateral is adequate for the loan (remember the three C’s of credit, capacity, and collateral). The appraisal is for their benefit, but at the same time, the appraiser needs to complete a fair and supportable valuation. There should never be any bias in favor of any party, or value.

Even though the lender is the client, the borrower is by regulation, required to be given a copy of the appraisal report. When a sale is involved, the valuation may be lower than contracted price. This begs the question, what, if anything, can the consumer do about it?

Lenders offer a formal “Reconsideration of Value” (ROV) process. Most have this process as “one and done” meaning the consumer cannot keep coming back with more data, therefore putting forward the best argument at the outset is imperative.

The steps involved in filing an ROV are to first read the entire appraisal report that was completed and examine the comparable sales as to whether they are ones that the consumer would have considered as reasonable alternatives or not. If there are ones the consumer considers more reasonable, then there are three important points that must be addressed:
1) Are the alternatives more recent to the effective date (not after)?
2) Are they more proximate to the subject?
3) Are they more similar in size, age, style, quality, and appeal?

If those alternate sales do not meet some of these criteria, then they are unlikely to be considered. The appraisal does not choose sales based on price, but on similarity to the subject property (with being proximate and recent important as well). Caveat is that sometimes an older sale that is highly similar will be the best indicator, if the adjustments for changing market conditions are analyzed and made.
Reading the appraisal report will disclose why the sales that were used were chosen, and how they compare.

Another possible reason for an ROV would be incorrect information in the appraisal report. This is particularly likely in the age of Covid-19 when some appraisers are not opening all doors and poking around the property as much as they used to. The half bathroom under the stairwell could be missed in that manner. Perhaps something was missed, and the appraiser could address it, but again reading the report will indicate if it were addressed, simply not included in the sales comparison grid that is the focus for most disputes.

If there is adequate information to move forward with the dispute, do not contact the appraiser. Remember the appraiser’s client is the lender, not the consumer or the real estate agent. Contact the loan officer for assistance in submitting an ROV, but remember these processes are mostly one-and-done, therefore be rational and compelling in that first submission.
• Explain how each sale that should be considered is in some way better than the ones in the report
• Limit the number of sales to three if possible
• Do not be confrontational
• Address any inaccuracies noted and support for that position

Most appraisers will respond to the ROV as a normal part of their business. Some will refuse to consider what was offered, but that is rare. Chances are the sales offered were already considered but not included, and the appraiser will respond as to why not, but sometimes a good valid sale is missed, simply because the geotagging or MLS area number were incorrectly inputted on the listing, and it did not show on the appraisers search. Sometimes there are sales that were showing as under contract as of the effective date of the appraisal that had closed. Sometimes errors occur since humans are human. Sometimes a value dispute will result in the appraised value increasing, sometimes it will result in no change, sometimes it will result in the value decreasing.

Do not assume the appraiser will refuse to look at the request. Put your best foot forward by providing solid data for consideration in a professional manner. If the value remains the same, then it is time to renegotiate or move on. Remember the appraisal is for the benefit of the lender to ensure there is adequate collateral for the property they are lending on.

Saline MI – Wildwood

Every town seems to have a neighborhood which has broad appeal. In Saline, Wildwood is one such neighborhood. Here occupants find wooded lots, walkout basements and proximity to many area amenities. What I thought my readers would find interesting is how this specific market has changed over time, measured over the past 12 plus years as well as what I see happening now. The sales information is gleaned from the Ann Arbor Area Board of Realtors MLS and does not include For Sale by Owner properties.

This first image is a scatter graph of the adjusted sales price of each sale from 2006 to 2/28/19. Prices are clearly trending upward.
The next graph shows the adjusted price per square foot in the same period. Price per square foot is meaningful, in that in a data set that contains different size properties, it can normalize some of the increase that might show if the recent sales are larger properties.

This graph also clearly shows an upward trend in price in Wildwood.
Another way we could look at this is with a chart laid out in how many sales per year occurred, what the average and median sales prices were, the average and median sizes, and average and median price per square foot. This type of information could be useful in showing where the majority of change occurred. So far 2019 has only two closed sales, but these were on average, smaller houses.

The graph that follows uses the average and median sales prices compared to each other from the data above. The blue bar is the median, which is my preference in measuring a market. This layout is helpful in seeing there was a slight dip in the market between 2008 and 2011, with the greatest increase in 2016.

Continuing in the same vein, price per square also shows an increase, but with 2018 running slightly below 2017 in general. If an appraiser indicated the market was slowing, based on this data, they would be correct, to an extent. The past three years showed similar gross living area both in the average and median sizes, with 2017 having slightly smaller sales than 2016 and 2018, meaning the expectation is that the price per square foot range would be higher. That is precisely what shows below, while the graph above shows an increase.

What is the saying? There are three kinds of lies: lies, damned lies, and statistics.

As of 3/1/19, the MLS showed no active available listings in Wildwood. There were three properties under contract. The lack of available properties in a subdivision that has steady turnover, indicates higher demand than supply, which in turn tends to drive prices upward.

All of this information is to help the consumer understand the various elements of the market an appraiser may study to measure what is happening with the market at any given time. Since appraisals are snapshots in time, understanding the market is a major component of the analysis.

You can access my website for information about appraisals, and what services I can provide. Please think of me for your private appraisal needs. https://annarborappraisals.com

Monthly market snapshot

Mixing up the way I do the monthly report a bit. In addition to the normal information about the absorption rates and where activity is as of a certain date, I have also included a two-year summary of price changes in each area. Hope that you all find this interesting, and as always, if you have questions, reach out to me, either via phone or email.

Without further ado, the monthly inventory in each market is showing from as low as 1.13 months, to as high as 3.56 months depending on the area. The area with the most inventory however, is actually showing as such due to the abundance of new construction exposed as “to be built”. This means the properties are not immediately available. Since I have run this data in the same manner consistently, I am carrying on with including all market exposed properties through the MLS, but Saline is not as saturated as it appears at first blush.

The market overall is undersupplied, with most areas around two months or less. Since this data includes every listing and sale within each school district, for submarket data, it does not apply. It is useful in measuring where activity is, but as always, you have to look at the market segment in which a property operates.

Based on the contract to listing ratios (CTLR on grid), the greatest activity is in Lincoln school district, followed by Ypsilanti and then Ann Arbor. The areas that are showing as leaning towards a buyers’ market are Manchester and Dexter. Saline is tilting towards a balanced market. Chelsea, Whitmore Lake, Lincoln, Milan, Ypsilanti and Ann Arbor are in seller’s market territory again.

It looks like spring may have sprung.

What about changes in price over time? Again, this is larger market data, not specific to any particular submarket section. These are arrayed by school district, and each data point is one-years’ worth of data at a time, moving forward in a monthly manner. This eliminates seasonality and is useful in seeing more nuanced changes. Looking at this information, it is easy to see that Dexter increased, but there is a decline over the past couple of months. Stability in pricing is seen in Chelsea, Saline, Ann Arbor and Ypsilanti based on the trend lines over the last four or so months. Prices have increased across the board in the past two years but also have slowed or even declined in places. Still, in comparison with two years ago, we are increased on the macro market segments.

If I take this information and put it on an easy to read grid and it is easy to see that over a two-year period, most of the markets are in the double-digits in increases, however the past year was not so kind to Manchester, Dexter, Saline and to an extent, Ann Arbor. The increases in these areas were smaller, and in some cases, negative. The largest increases in the past year were found in Milan, Ypsilanti and Whitmore Lake. This makes sense when observing the median prices, which are lower in those areas, with the outlier being Manchester. My take on this is that as some markets have become expensive for the average buyer, they have moved into different, lower priced markets, which are putting pressure on increases in those areas.

I am continuing to observe our market on every appraisal I develop and communicate. Markets can change quite rapidly, and each market will have a number of submarkets within it. All of this information is presented in a broad manner for ease of reading. All information is culled from the Ann Arbor Area Board of Realtors MLS and is assumed accurate.

Appraisal process for consumers

Consumers see only a small portion of the appraisal process. What consumers often see is the appraisers visit to the property, and the written communication. They do not see the process that the appraiser goes through in developing their opinion of value. My hope is that this piece will help consumers understand a bit about the appraisal process, beyond the number that is of vital importance to almost everyone who picks up an appraisal report.

 

Appraisers start with identifying the problem to be solved, including who the client is, and what the intended use of the assignment results are. It includes the type of value; the effective date of value; the characteristics of the property that are relevant to the problem; and whether there are any conditions that are placed on the assignment that need to be considered. These include extraordinary assumptions (assumed to be true specific to a property, but not known for certain) and hypothetical conditions (contrary to fact).  Clients can be lenders, they be attorneys in litigation or consumers who need a problem solved among others. The intended use can be for mortgage financing, for establishing a value in an equitable dissolution issue, or it can be for buying a house without a loan. There is a myriad of reasons someone may wish to have an independent opinion of value. Characteristics of the property that are relevant are those elements that an appraiser considers as contributing to the value of the property. They can be quite varied, and are truly the appraisers call.

 

From this initial identification flows the appraiser’s decision on what needs to be considered in developing their opinion. Does the appraiser need to visit the property? How detailed an observation do they need to make? What types of sources are they going to consult in the research? These all form the scope of work determination.  After that, the appraiser needs to consider data collection and property description, including analysis of the market area, the subject property itself, comparable sales, listings, cost and income if they are relevant.

 

After collecting all of this information, the appraiser analyzes the data. They analyze the market, including supply and demand factors, and any marketability issues. They study the highest and best use of the property. They research the site value and the different approaches to value are considered.  After all of this is completed, the appraiser takes the data and approaches and reconciles it into one or more value indications, and then to one final value conclusion (which may be a point value, or a range, depending on the client’s needs).

 

The final step in the process is the report. This is where all of the analysis that took place comes together in what you see and read.  Reports can be very brief, addressing only the points that are required to be addressed per our standards, or the report can be detailed and address everything under the sun. Of course, the report can be in between as well. The point is that the report should not require the client to take a “leap of faith” to understand how the appraiser got from point A to point Z. It should be completed in a way that is meaningful to the client and does not mislead them with erroneous or incorrect information. Ideally the report will take the client on a journey to understand how the appraiser looked at the data and how they came to their conclusion.  Appraisal reports should be clear and help lead the client to a logical conclusion. Even if the client does not agree with the results in the end, they should always be able to understand how the appraiser got to their conclusion.

 

If you have any questions, please feel free to contact me.

 

Why hire an appraiser?

 

Why hire an appraiser?

 

There is a myriad of reasons that someone would need an appraisal, from mortgage financing, to estate planning, relocation, litigation, among others. This piece relates to work engaged directly by a private client specific to that client’s needs. A testimonial is included as it shows how this type of work can be a direct benefit to the client, plus it was such a nice one that it bared sharing.

 

An appraisal seeks to answer the question the client has, and the report that is received is the communication of that process. Clients do not see, unless it is explained, the thought process that goes into developing the appraisal. Because of that, the reporting process is critical. Reporting needs to communicate enough about the process and the property to help the client understand how the appraiser arrived at their opinion. It should not require the client to take a “leap of faith” to understand how the appraiser ended up where they did. After all, we are hired to answer a specific question so that our clients can make an informed decision.

 

As much of my work is for private individuals who have various needs, I want to make sure that I explain what I have done, and what the problems particular to the appraisal at hand are. Some problems are more complex and require more explanation. Some are more straight-forward, but I still want to be sure that my client understands what I did and why I did it. Clients do appreciate the explanation, whether or not they appreciate the answer. Even if they do not like the answer, there should be enough information offered that they can understand the rationale behind it.

 

On private assignments I will often ask my clients whether the report was helpful, and sometimes ask for testimonials for my website so that other potential clients can see how an appraisal has benefitted them. I recently completed a very complex assignment where explanation was greater than typical due to the uniqueness of the situation and problem to be solved. My client wrote the following for my testimonial page:

 

“Rachel Massey was actually recommended to us by another appraiser in the Ann Arbor area who could not fit us into his schedule. Given that she is a competitor, I was surprised when he freely admitted that “Rachel is the best around,” and now I know why.  Indeed, we were very impressed with Rachel Massey’s services! Our market appraisal was a challenging one in that we were purchasing a lake property which included a very old, tiny cottage in pretty rough shape.  Because houses do not go up for sale very often on this particular lake, finding comparative values was difficult, especially given the condition of the house itself. However, Rachel proved to be extremely knowledgeable about how to accurately assess lake properties. In the end, she provided us with an extensive, detailed report that far exceeded our expectations. It gave us all the data we needed to be able to offer a fair, market-based price for such a unique property. My husband and I would wholeheartedly recommend Rachel Massey’s services to anyone who is in the process of buying or selling a home!”

 

Now of course if there was an issue or disagreement with the analysis, I want to hear it as well (but not on my website) and be offered a chance to provide further explanation if something was not clear. It helps me better understand where I can improve the communication process going forward.

 

If you have a question that requires a thoughtful, independent answer, please consider hiring a professional appraiser to help. Interview the appraiser about their processes, and about how they communicate the report. Interview them about their knowledge of a specific problem that is to be solved and ask for recommendations if at all in doubt.  An independent appraisal specific to the problem that you need solved is an invaluable tool that should not be overlooked.

 

Vernon Downs

 

Situated north of Scio Church Road and south of Avondale, on Ann Arbors West Side, Vernon Downs is a long popular development built in several phases between 1955 and 1965 by George Airey. The houses are well-built, and a mixture of ranch, split-level, capes and colonials. The majority of houses are ranch style, between 1,200 and 1,400 sqft in size. The oldest parts of the subdivision along Winsted, Sanford, Weldon and Waverly are primarily smaller ranches with varying degrees of off-street parking including carports, detached, attached, and no garages. The later part of the development along the west side, towards Maple Road (Waltham, Agincourt, Covington, and others) have more mixture and larger houses, with attached garages standard. The primary school is located on the northwestern side of the subdivision, and the area high school is less than one mile east across Seventh.

 

The Ann Arbor Area Board of Realtors no longer retains hardcopy MLS books, but does retain fairly robust data back to 2005, and in some instances earlier. Doing a search for the word “Vernon” in the legal description of all sales found online, and then restricting these to ranch style only, it is easy to track movement in price over time, including the Great Recession that hit Ann Arbor as well as the nation in general. The first graph shows price reductions for individual sales over time. This was included as price reductions are a leading indicator of a changing market. Using this information, it was clear that price reductions had started in 2005-06, and that they had increased in number between 2007 and 2010, then a second spike in 2012.

 

price reductions

 

The next data run was related to net sales price over time, showing increases at a significant level over the past few years, and the largest dip in prices here between 2009 and 2010.

 

net SP over time

 

Because there were varying size houses in the mix, and because the neighborhood is spread out in phases with the newer larger houses tending to sell at higher prices, price per square foot was also run. This data also shows a dip in prices in 2009 and 2010.

 

net sp per sqft

 

Because there were so many sales using this method (204 in total), it was also broken out year by year, and finally comparing current activity in the neighborhood using the same criteria of “Vernon” and ranch style houses. This is displayed in average price over time, as median and averages were largely similar.

 

price time

 

In observing this data, what is particularly noted is that right now, there is only one active and one property under contract, but both are lower priced than the past two years sales. Of course, the contracted property is smaller than the averages and likely in the older section, but it is worth noting.

 

Using the data above on a yearly run, It is easy to see how the list price to sales price ratio widened over time to a low point in 2005 (too few sales) and 2010, and rose over 100% in 2016 and 2017. So far, 2018 is lower, just over 97%. Part is likely due to the increasing prices however. Again, this could be a bellwether indicator of a market in transition.

 

avg lp sp ratio

 

Average sales price over time shows a decline from 2004 to 2005, but again there were too few sales in the MLS at that time to be meaningful, and an increase slightly in 2006 and 2007, followed by a decline to a low point in 2009. Because markets are very location specific, this is very interesting to observe, as the condominium study  that was completed last week showed a decline in prices starting in 2005. Those condominium properties are on the southwest side of Ann Arbor, only a couple miles from Vernon Downs. It actually makes a lot of sense to see rates of decline and increase at different times, because so much of what we see related to price fluctuation can be related to supply and demand. In areas with ample supply, the market may change at a greater rate, and at an earlier time. The average sales price per square foot ratio is much the same as the average price ratio, so is not posted in addition, but there is a leveling of price per square foot noted between 2017 and 2018.

 

avg sp over time

 

For the real estate professionals reading this blog, how does the current market “feel” to you? Does it feel like a normal winter slowdown, particularly with some early cold snaps we have had, or are the interest rates and price increases over the past couple of years perhaps taking a toll? Probably none of us can pin this down at the moment, but it is worth watching what is going on with the market, particularly the properties that are on the market and not going to contract, the price reductions, and the list prices of the contracted listings.

Hope everyone had a great Thanksgiving, and be safe out there!

Who are you going to call?

…Ghost busters!

 

building-joy-planning-plans

 

Social media can be rife with misinformation, such as when the information presented is well intentioned, but of a national scope. National studies are not local studies, and blanket statements presented as fact are potentially misleading. Real estate agents are professionals who are involved in selling houses on a daily basis and know their markets — as well as what drives interest with the buyers and sellers they are working with. Their job is difficult; often rewarding, and they make lasting relationships with the people they have worked with. Most agents are “people persons” who thrive on human interactions, and on being able to make a difference in the lives they touch.  Agents do know what their buyers are willing to pay for certain features in certain markets and price ranges, but often do not approach the valuation process in the manner that appraisers do.

 

Take this ad for example. The agent had a great talking point related to how various remodeling projects can add to the appeal of a property and perhaps the eventual sales price, but the talking points were incorrectly presented. There are a few issues with this ad, one is that there are very specific percentages expressed, and another that there is no source citation for these percentages. The main issue however is, if a real estate agent is the right individual to state what adds value on a home appraisal?

 

odd question

 

While advertising is critical in today’s market, advertising specific percentages or numbers about specific remodeling projects gleaned from national sources, can be misleading. Stating that these features add value to an appraisal, and that the reader should ask a real estate agent about what adds value to an appraisal, is illogical. Instead, simply go to a source, such as your local appraiser and get an appraisal completed.

 

For the percentages above, we have no idea where this hypothetical property is located; what price range or market segment it is in, or what the source for information is. In addition, the numbers are so precise that they are not logical. If one were to replace a garage door for $3,000, would it truly add a return of 98.3% or $2,949?  Would that manufactured stone you put on the house, that some buyers will like and others hate, truly add 97.1% return? Do buyers even look at a property and say that they will pay $50.47 more per square foot than another house that was 95-sqft smaller? These types of advertisements are catchy, but they could also be misleading.  In addition, the ad clearly points the reader to contact a real estate agent to tell you how much value a renovation adds to a home appraisal. This too is illogical, since an agent is not an appraiser and the job functions are not the same.

 

A professional appraiser, who knows the local market, has the ability to both provide a current value, and a value “subject to” the proposed changes. Appraisers approach each problem to be solved in a competent, independent, impartial and objective manner. There is significant training and experience required to become a certified appraiser.  Real estate agents have a lot of specific training and education as well, but their roles are different and agents work on helping buyers and sellers achieve their goals of purchasing/selling real property. They are often functioning in multiple roles, such as acting as mediator, stager, chauffeur, diplomat and therapist. While they deal with sales prices, and know what buyers are willing to pay for properties, their view on the properties is much more “larger picture” than an appraiser specific, researched and analyzed determination.

 

When considering buying or selling a property, the agent is the first to call. When considering a remodel or addition and the effect on the value on the property, the appraiser is the first to call.

Contemplating a Remodel?

 

You love your location, but you are growing to hate your home. It is simply too small, awkward and out of date, so you consider moving.

 

After looking at what is available, and the hassle of picking up to ready your house for sale, let alone finding a suitable house in the price range you are comfortable with, you start entertaining the idea of having your home remodeled and expanded. Who wouldn’t? Of course, before undertaking a large project, getting an idea of where you currently stand in terms of your properties value, and where you will stand after the project is completed, is a good idea. The following is a brief discussion of what to consider.

 

Renovating and/or expanding your existing residence can be a great idea. You already own the property so do not need to worry about competing with others for another one; you know your neighbors and get along; your taxes won’t go sky-high by moving and uncapping the current rate; you don’t have to get a new mortgage other than perhaps an equity or renovation loan, so you can keep the lower underlying rate. Other than the mess and disruption of living through a construction project, are there other downsides?

 

The downsides on taking on a large construction project (or even a smaller scale one) are that it is very easy to spend more than you will recoup in the market. In fact, it is good to go into the project with the expectation that you will NOT recoup your costs, but that you are contemplating the project to take a home that you are beginning to hate and turn it into one that you absolutely love.

 

Do not go into a project expecting it to give you a high return on investment.  Logically it makes sense to take a look at the value of your property before the renovations and what it would be worth at the same time with the proposed renovations. This is where a professional appraiser can be your best option in terms of possibly scaling back the plans, or going forward understanding where you stand.

 

A professional appraiser who knows your market has the ability to both provide a current value, and a value “subject to” the proposed changes. Appraisers approach each problem to be solved in a competent, independent, impartial and objective manner. The appraisal process itself is designed to conclude to an opinion that is logical, and factors in identifying what the problem is the client (you) are trying to solve. There is significant training and experience required to become a certified appraiser. In fact, experience and qualifications for anyone who you hire should be considered as critical, including the architects, designers, and building contractors. Professionals will be eager to provide their qualifications and experience upon request. If you are contemplating any remodeling, approach hiring the professionals with as much care as you would the actual remodel.

 

 

 

pexels-photo-735319

Pre-listing appraisals

pexels-photo-101808

There is a lot of negative commentary in social media and in the press related to what appraisals are and what appraisers do. Much of it seems to stem from a misunderstanding of the appraisal process. I just saw a YouTube video an agent put together disparaging appraisals from the pre-listing perspective, and instead advocating for the use of agent’s market analysis.  Both appraisal and CMAs are valid, as they have different functions, and it makes no sense to disparage one to try and sell the other.

 

In order to help dispel some myths that cause this type of misunderstanding, consider what an appraisal is, and what a CMA is, and how both are useful in the prelisting process.

 

From the Uniform Standards of Professional Appraisal Practice (USPAP) definitions section:

APPRAISAL: (noun) the act or process of developing an opinion of value; an opinion of value. (adjective) of or pertaining to appraising and related functions such as appraisal practice or appraisal services.

Comment: An appraisal must be numerically expressed as a specific amount, as a range of numbers, or as a relationship (e.g., not more than, not less than) to a previous value opinion or numerical benchmark (e.g., assessed value, collateral value).

REPORT: any communication, written or oral, of an appraisal or appraisal review that is transmitted to the client or a party authorized by the client upon completion of an assignment.

APPRAISER: one who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective.

Comment: Such expectation occurs when individuals, either by choice or by requirement placed upon them or upon the service they provide by law, regulation, or agreement with the client or intended users, represent that they comply.

 

Looking at these definitions, an appraisal relates to the development of the opinion of value, while the report is the communication of that opinion. Most of what the public sees is the report, not the act of development.

 

The definition of appraiser is particularly important as this is one who is expected to perform competently, independently, impartially and objectively. Why would there be any objection at all to someone who is performing this work in such a manner as the definition of an appraiser implies?  The appraisal report should, by its very definition, end up being an unbiased opinion. I will add that the opinion is based on factual data that is observed, analyzed, and reported in a competent manner. Because of that, it is very important that data that is provided to the MLS and public records be reported accurately, as both agents and appraisers will need to rely on what is reported to a large extent.

 

A competitive market analysis (CMA) is the REALTORs study of the market and the subject properties position in the market. Most agents use similar data sources that the appraisers use, but tend to focus more on the active properties as compared to the sold properties in establishing an asking price.  This makes sense because the buyer is not going to have the opportunity to buy one of the comparable sales that are used in an appraisal report, since they already sold. They could buy one of the active alternatives. In that manner, this is a logical approach.  One concern with it however, is that the appraisal will need to at least meet the sales price once the property goes to contract, therefore studying the past sales is paramount as well.

 

Ideally both appraisals and CMAs consider both the past and the present, as well as the current market tone and activity. Appraisers look to most probable sales price, while agents will try and focus on the highest possible price for their client.  Often sellers will have two or more CMAs for their property completed as part of the various listing presentations, as agents vie for a listing. Sometimes the agent’s CMAs are not close together at all, and the owner needs an independent opinion, which is where many appraisals for pre-listing information come into play. Sometimes sellers are simply more comfortable hiring an appraiser to provide them an opinion outside of the listing process, to ensure they do not significantly overprice their property.  This too makes sense. Spending a little bit of money prior to listing, could save substantial time and heartache if the property does not sell and is marketed an extended time. Or it could do the same if it does sell, but cannot be supported by closed sales in the market. Many sellers look at the appraisal report as an ounce of protection being worth more than a pound of cure.

 

Both appraisals and CMAs have a place in the process of listing a property for sale. Homeowners should carefully review an appraiser’s experience, qualifications and knowledge of the market, as well as that of any agent they hire.  After all, both appraisers and agents will work a market extensively, whereas a seller (or buyer) will only occasionally participate in the real estate market.

 

Ann Arbor market snapshot by price

 

stats

 

Although appraisers do not run search parameters for their comparable sales by price range, occasionally running market information by price can help isolate where the shortages and excesses are. Take for example, this information from 9/18/18, run between 8 – 8:30 PM through the Ann Arbor Area Board of Realtors.

 

This is a very quick snapshot of how many sales occurred in each price bracket shown within the Ann Arbor school district compared to what was available for sale, and those that were already reported under contract (P&C). The CTLR column refers to the contract-to-listing ratio, simply put the number of properties under contract compared to the total number listed for sale at any given time. The last column relates to how many months supply there is based on the last 12-months sales in that price bracket.

 

Not unsurprisingly, the lowest priced houses showed the greatest absorption into the market and the lowest supply. Up to $500,000 the market showed good absorption with over 37% of the houses on the market under contract and less than a three month supply, and over $500,000 the absorption rate drops (other than the anomaly of the $801,000-$900,000 range) and months of inventory increases.

9.18.18 price snapshot

This is good information to consider, as the narrative in the news may be that we are experiencing a severe housing shortage, but if it is broken down into a price range, what shows is a housing shortage under a certain price point, and excess inventory over that price point.