New Rules Make Planning A Must For Honolulu Buyers And Sellers
July 30th, 2009 categories: For Buyers, For Sellers
In previous posts, I have talked about the crazy appraisal rules enacted at the beginning of May. The Wall Street Journal is now reporting that the rules have been creating problems.
“New rules aimed at making home appraisals more accurate are raising costs and prompting longer waits to get to the closing table, some in the mortgage industry say. The new rules — known as the Home Valuation Code of Conduct and in effect less than three months — have driven up the cost of appraisals, says Keith Stewart, a mortgage consultant with NorthPoint Lending Group in Chicago.”
CLICK HERE TO READ THE WALL STREET JOURNAL ARTICLE
Since we have to live with these rules, it is becoming more imperative that both buyers and sellers of Honolulu real estate do their homework before entering the home market. Here are four things to consider before jumping into a sale or purchase.
1. Confirm that there is enough recent evidence to support the price. In the “old days”, appraisers would try to find comparable sales as far back as six months; I am told that they are now trying to limit information to the past three months. This means that you want to have strong relevant information supporting the value of a home or condominium, without this evidence you may find your deal blown by a low appraisal.
2. Expect the appraisal to come in at the lower range of value. As stated in the past, there is no absolute value for a piece of property, just a range of value. Again, back in the “old days” appraisers and lenders were perfectly fine using the upper range of value. Based on recent appraisals I have seen done for clients, I am firmly convinced that the appraisers and lenders are in cahoots to have properties appraised at the lower price range. This means that unless there is overwhelming evidence for a higher price, you should expect the price to be on the low side.
3. Expect closings to take a bit longer. It used to be very possible to close a sale in 30 days, with these new rules add some time and expect to close in 45 days.
4. I am not an appraiser, but, as mentioned above, in general expect appraisers to be conservative. This includes the following.
a. They will want comparable sales in close proximity to the subject property. The days of using sales 5 to 10 miles away are gone.
b. If the home has been upgraded in comparison to the relevant sales used in the appraisal, expect less credit for upgrades.
c. This goes for location too, if a property has a superior location as compared to others that have sold, you should expect a lower marginal adjustment for a superior locale.
In summary, for the short term we will have to manage sales and purchases to take into account these new rules. Over the long haul, since they aren’t good for anyone (buyers, sellers, lenders or appraisers) the kinks should get worked out and I expect them to back off on some of the more arcane positions.
If you would like to discuss your real estate needs, feel free to call me at 808-737-2093 or toll free at 877-737-2093. You can email me at keahi@lava.net.
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