appraisals (2)

Appraisals: Costing Us Equity?

Its not just location location in this market. Much more complex issues drive value of both residential and investment property.

When serious damage is done to an asset class and there is a big re-think regarding its true worth, no one truly knows what its worth, past assumptions may no longer be relevant. So appraisers are shooting in the dark. Without significant sale or leasing activity, it becomes difficult to do comps. And looking back is useless, since we know the data series is completely debunked.

FDIC Lawsuits
The FDIC has taken over more then 200 banks in the last 2 years and is considering legal claims against anyone involved in a bank failing. If an appraiser did an appraisal for a failed bank, the FDIC could look to sue. Many appraisers are concerned that there appraisals may be considered high in light of all that equity loss. Appraisers are afraid that they may seen as having fooled the banks or been party to irresponsible lending practices. The FDIC is rumored to be hiring hundreds of law firms to pursue professional liability law suits.

How Appraisers Are Adapting
They Are Coming In Low

Extremely low appraisals, using the lowest possible com parables, are disrupting the housing market. Taking the position, in uncertain times, that best way for an appraiser to avoid a lawsuit today is to low ball the appraisal. Play it safe.

This is causing home valuations to drop even further and perhaps unnecessary so. see chart The write downs in property values are ranging from 10% to more than 60% and they are impacting performing and non performing property.There is a concern that existing and legitimate equity is not being recognized as appraisers over compensate for fear of a law suit down the road. When you have to refi, as the CRE sector does, this may mean coming up with massive amount of money just as they step up to wary banks. Owners who are selling are finding that these low ball appraisals are causing them to pull property off the markets or sell for even less.

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Green Home Trends: 2010

The key to mainstreaming green homes is to make sure that consumers understand the value of green upgrades — how cost-effective energy efficiency can be in the long run. Consumers want homes that are environmentally friendly and home values should reflect the increased savings.

Better Homes and Gardens


Recent poll results of 2,342 people who plan to purchase or do a major home improvement in 2010 show (numbers have been rounded):
  • 2% of consumers are planning to have high-efficiency heating and cooling in their next home
  • 3% are planning to have high-efficiency appliances
  • 3% will have geo-thermal heat
  • 5% said energy-efficient heating and cooling will be more important to them
  • 6% said Energy Star appliances will be more important

Appraising Green


Appraisals need to better reflect the value added to energy efficient green upgrades. Legislation is pending which will require the consideration of any renewable energy sources, or energy-efficiency or energy-conserving improvements. Appraisers will tell you they have been considering green improvements for 15 years, typically, double paned windows, insulation and solar hot water heaters. The value normally attributed is the installation cost. But that is just the beginning of the direct savings to the new owner. The ongoing savings of operating a greener home is not being reflected in the appraisal and yet it can be significant when compared to a home that isn’t energy efficient.

To reflect true value buyers need to recognize the increase savings when comparing homes. Appraisers will tell you that when the energy cost savings can be documented, home buyers are more willing to pay a premium. They understand the lower monthly cost of ownership and better resale value.


Green Marketing Incentives

Most state energy and public utilities offer incentives, rebates and tax breaks for energy efficient upgrades. Realtors should suggest that sellers take advantage of these incentives. Consumers clearly want greener homes and agencies offering rebates can document the projected savings. This can be a powerful sales incentive in a market where value
is king.



REsourced from www.yourpropertypath.com
You may republish this article, as long as you do not edit and you agree to preserve all links to the author and www.yourpropertypath.com


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