Let's Get REAL Estate

We do have our fair share of appraisal issues here in South Florida! It is a common occurrence for an appraisal to "come in" under the contract price. Unless a compromise can be worked out, the deal usually dies. We are pretty lucky in our market to have a fair number of cash buyers. In an improving market, that tends to help the market recover faster by providing higher comps because cash sales don't require an appraisal.

The biggest issue is the question, "Can you compare distressed sales to regular sales"? If the market share of distressed sales is 30-40% of sales, does that make it normal and thus comparable? Many people (including appraisers) say yes! I have to disagree!

The biggest problem with the above premise is that the lenders who have foreclosed on a property and then resell typically underprice the homes. They hand over bulk properties to companies who are told to dump them. They are sold very quickly and usually to an investor and the lender doesn't care what they get for the home. They really have created more problems by not asking more for the property. They are writing off a higher amount than would have been needed as well as creating the issue of low appraisals. Which comes full circle in hindering a market recovery.

Unfortunately, this trend will continue. But 4 states (not Florida) have pending bills that would stop short sales and foreclosures from being used as comparables. I hope this trend comes to Florida...but don't hold your breath! Our legislature is half way through it's session and they have yet to pass anything meaningful to help our jobs or real estate market (AS PROMISED).

What do you think?