In this market, buyers cannot possibly overpay for a property if they are financing or the contract for sale and purchase is contingent upon the property appraising at contract price.
The beauty of purchasing in this "buyer perfect" market includes:
- Interest rates under 5 percent.
- An abundance of properties to choose from.
- An $8,000 tax credit for first-time homebuyers.
Now buyers have the best protection possible: lenders in our area and in most of the United States are mandated to proceed with caution in the appraisal process. The appraisal is scrutinized in "underwriting," and appraisers are following procedures to select sales from the past six months that are comparable to the property being financed. Appraisals, therefore, are low, and lenders will not lend if the appraisal or value of the property is indicated to be less than the purchase price.
In addition to using sales within the past six months, appraisers must use a "depreciated market adjustment" for the months past the time of the sale. This adds to the lowering of the appraised value. What does this mean to the seller? The motivated seller must price his/her property at the appraised value.
Fair or not fair? In my opinion, this keeps the market from increasing in value. The fact is, there is nothing we can do about this until the abundance of properties are absorbed and the balance of supply and demand comes to the real estate market.
The possible solution or correction to this appraisal issue is obvious: Sell low and buy low. Use the market to your benefit. We cannot change the past, and now we have to live with the conservative lender practices. It seems to be a lateral move if you lose on the sale and gain on the purchase.
As our crystal clear skies come with the occasional threat of thunderstorms, so too this wonderful, very active market, has some black clouds. But the sun continues to shine on Brevard County.
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