Selling or refinancing a home in Detroit is further complicated by new appraisal rules while home prices continue to decline.
The odds of getting a house to the closing table are affected by appraisals done by appraisers who are completely unfamiliar with the area. The resulting appraisal comes in lower than the price the seller & buyer have agreed upon and problems with who is going to pay the difference kill the deal. Excerpts from articles in the Detroit News & New York Times pinpoint the problems . The ray of light in this challenging market is that the number of unsold homes fell in every Midwestern city last month from a year ago.
Fed appraisal rules sink home values
New regulations kill home sales, industry groups say
Louis Aguilar / The Detroit News
Federal actions intended to stabilize inflated real estate prices that led to last year's financial meltdown are instead depressing prices and killing some sales in an already weak market.
At issue is the Home Valuation Code of Conduct for mortgages securitized or held by Fannie Mae or Freddie Mac, which deal with about 70 percent of U.S. mortgages.
The new rules, which took effect May 1, were intended to prevent cozy relationships between appraisers, agents and brokers that could lead to bias, fraud and inflated home values.
But a chorus of industry groups representing builders and real estate agents say the new rules have damaging, unintended consequences: Some appraisers, they say, are unfamiliar with communities and neighborhoods, so they undervalue property. And that can kill a deal when the agreed-to sales price was significantly higher than the appraisal.
The National Association of Realtors says 20 percent of its members report losing more than one deal because an appraisal came in well below the purchase price agreed to by the buyer and seller. The National Association of Home Builders contends the code is impeding new construction as well. More than half of the 500 builders who responded to a recent survey said at least one of their new homes was appraised at less than the cost of construction.
Metro Detroit real estate agents tell horror stories about the new appraisal rules.
An out-of-state appraiser, for example, valued a Grosse Pointe home at $270,000, although the seller and buyer agreed to $360,000. A lakefront home in St. Clair Shores listed at $480,000 was appraised at just over half that. And three appraisals on a new home in Detroit's Woodbridge Estates ranged from $150,000 to $230,000.
"We lost the sale because the couple didn't know what to believe," Realtor Todd Craft, of City Life Realty in West Bloomfield, said of the Woodbridge properties. "That's what we are dealing with now."
If an appraisal falls below the negotiated sales price, the lender can refuse to finance the deal or require the buyer to come up with the difference. Or the seller may lower the price.
While home sales are up in Metro Detroit, thanks to the buyer's market, prices continue to plummet. The median sales home price in Metro Detroit in Sept. was $65,500, a 23 percent drop from a year ago, according to Realcomp II Ltd., a Farmington Hills-based real estate listing service.
Existing and new home sales aren't the only ones that are affected. The new rules also impact homeowners who want to refinance their mortgages, because they need to get an appraisal as part of the process.
"In a city like Metro Detroit, where there are pockets of stable and upcoming areas, the new appraisals make it tougher for someone who doesn't know the area to come in and get an accurate gauge," said Brian Cooley, a Realtor with O'Connor Realty Detroit in Corktown.
Midwest Home Resales Post 6 Pct Annual Increase
By THE ASSOCIATED PRESS
Published: October 23, 2009
Home sales in the Midwest increased in September as a soon-to-expire tax credit for first-time buyers and glimmers of an economic recovery brought more people to the closing table.
The National Association of Realtors said Friday that there were an estimated 110,000 resales in the Midwest, up 5.8 percent from September last year. The median sale price for the region fell 1 percent to $147,600, marking the smallest decline in the country.
Nationally, home resales rose almost 8 percent from a year ago, without adjusting for seasonal factors. The median sale price fell 8.5 percent to $174,900, the Realtors association said.
-- Biggest price decline: Detroit continued to lead in an unfortunate trend as the median sale price dropped almost 22 percent from a year ago to $65,000. The lower prices have brought in investors and bargain-hunters, however, and sales rose more than 3 percent last month.
The city, hammered by losses in its key automotive industry, has seen massive numbers of foreclosures and distressed sales, which typically sell at a significant discount and make it virtually impossible for conventional sellers to get anywhere near what they want for their homes. Michigan has also struggled with job losses, posting the nation's highest unemployment rate of 15.3 percent last month.
Thomas Bush of Real Estate One in Shelby Township, Mich., a Detroit suburb, said he estimates fewer than 10 percent of homes going on the market these days are conventional sales and prices are back to 20-year lows.
''I don't think we've seen what the auto problems are doing to the market in Detroit,'' he said. ''We're seeing the effects of bad mortgages, bad choices. What happens when all the other stuff comes?''
-- Inventory highlight: The number of unsold homes fell in every Midwestern city last month from a year ago, according to the AP-Re/Max report. Indianapolis, Detroit and Cleveland led the region, with inventory drops of more than 29 percent each. Wichita, Kan., had the smallest, shaving just 0.2 percent off its backlog.
The odds of getting a house to the closing table are affected by appraisals done by appraisers who are completely unfamiliar with the area. The resulting appraisal comes in lower than the price the seller & buyer have agreed upon and problems with who is going to pay the difference kill the deal. Excerpts from articles in the Detroit News & New York Times pinpoint the problems . The ray of light in this challenging market is that the number of unsold homes fell in every Midwestern city last month from a year ago.
Fed appraisal rules sink home values
New regulations kill home sales, industry groups say
Louis Aguilar / The Detroit News
Federal actions intended to stabilize inflated real estate prices that led to last year's financial meltdown are instead depressing prices and killing some sales in an already weak market.
At issue is the Home Valuation Code of Conduct for mortgages securitized or held by Fannie Mae or Freddie Mac, which deal with about 70 percent of U.S. mortgages.
The new rules, which took effect May 1, were intended to prevent cozy relationships between appraisers, agents and brokers that could lead to bias, fraud and inflated home values.
But a chorus of industry groups representing builders and real estate agents say the new rules have damaging, unintended consequences: Some appraisers, they say, are unfamiliar with communities and neighborhoods, so they undervalue property. And that can kill a deal when the agreed-to sales price was significantly higher than the appraisal.
The National Association of Realtors says 20 percent of its members report losing more than one deal because an appraisal came in well below the purchase price agreed to by the buyer and seller. The National Association of Home Builders contends the code is impeding new construction as well. More than half of the 500 builders who responded to a recent survey said at least one of their new homes was appraised at less than the cost of construction.
Metro Detroit real estate agents tell horror stories about the new appraisal rules.
An out-of-state appraiser, for example, valued a Grosse Pointe home at $270,000, although the seller and buyer agreed to $360,000. A lakefront home in St. Clair Shores listed at $480,000 was appraised at just over half that. And three appraisals on a new home in Detroit's Woodbridge Estates ranged from $150,000 to $230,000.
"We lost the sale because the couple didn't know what to believe," Realtor Todd Craft, of City Life Realty in West Bloomfield, said of the Woodbridge properties. "That's what we are dealing with now."
If an appraisal falls below the negotiated sales price, the lender can refuse to finance the deal or require the buyer to come up with the difference. Or the seller may lower the price.
While home sales are up in Metro Detroit, thanks to the buyer's market, prices continue to plummet. The median sales home price in Metro Detroit in Sept. was $65,500, a 23 percent drop from a year ago, according to Realcomp II Ltd., a Farmington Hills-based real estate listing service.
Existing and new home sales aren't the only ones that are affected. The new rules also impact homeowners who want to refinance their mortgages, because they need to get an appraisal as part of the process.
"In a city like Metro Detroit, where there are pockets of stable and upcoming areas, the new appraisals make it tougher for someone who doesn't know the area to come in and get an accurate gauge," said Brian Cooley, a Realtor with O'Connor Realty Detroit in Corktown.
Midwest Home Resales Post 6 Pct Annual Increase
By THE ASSOCIATED PRESS
Published: October 23, 2009
Home sales in the Midwest increased in September as a soon-to-expire tax credit for first-time buyers and glimmers of an economic recovery brought more people to the closing table.
The National Association of Realtors said Friday that there were an estimated 110,000 resales in the Midwest, up 5.8 percent from September last year. The median sale price for the region fell 1 percent to $147,600, marking the smallest decline in the country.
Nationally, home resales rose almost 8 percent from a year ago, without adjusting for seasonal factors. The median sale price fell 8.5 percent to $174,900, the Realtors association said.
-- Biggest price decline: Detroit continued to lead in an unfortunate trend as the median sale price dropped almost 22 percent from a year ago to $65,000. The lower prices have brought in investors and bargain-hunters, however, and sales rose more than 3 percent last month.
The city, hammered by losses in its key automotive industry, has seen massive numbers of foreclosures and distressed sales, which typically sell at a significant discount and make it virtually impossible for conventional sellers to get anywhere near what they want for their homes. Michigan has also struggled with job losses, posting the nation's highest unemployment rate of 15.3 percent last month.
Thomas Bush of Real Estate One in Shelby Township, Mich., a Detroit suburb, said he estimates fewer than 10 percent of homes going on the market these days are conventional sales and prices are back to 20-year lows.
''I don't think we've seen what the auto problems are doing to the market in Detroit,'' he said. ''We're seeing the effects of bad mortgages, bad choices. What happens when all the other stuff comes?''
-- Inventory highlight: The number of unsold homes fell in every Midwestern city last month from a year ago, according to the AP-Re/Max report. Indianapolis, Detroit and Cleveland led the region, with inventory drops of more than 29 percent each. Wichita, Kan., had the smallest, shaving just 0.2 percent off its backlog.
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