Many factors are involved in the proper valuation of a residential property. The external influences are just as important as the internal or onsite influences of value contributors.
You may have heard it said, "the property did not appraise"...actually – ALL properties will appraise at a figure – it just may not be the figure that someone wanted.
We are currently going through a cycle where we anticipate the slight increase of mortgage rates after nearly 5 years of nearly all time lows. Many of us remember 18% and 13%-14% rates when we purchased our own homes in the 1980’s. The current cycle is actually a cleansing cycle. Thanks to the sub-prime market financing, we had an all time surge of first time homebuyers for a long time (yes, 5 years is a long time). The increased demand for housing has resulted in the increase of prices (the Principle of Supply and Demand).
For a while we had a shortage of active listings which resulted in a bidding war – prices increased at an alarming rate resulting in "auction value" versus "market value". Appraisers could not use the term "auction value". Therefore, our reports were interpreted as market value. Anyone studying economics can confirm that no commodity continues to increase perpetually. An astute observer of the marketplace must also recognize that there must be a period of correction. The increase of foreclosure sales may soften prices of Real Estate, however the overall economy does not appear to demonstrate that a "bubble" has burst – maybe a slow leak for awhile.
Again, this is not abnormal market behavior – so hang onto your hat and don’t do anything rash – you will be fine as long as you continue to make your mortgage payments. The real estate market will recover and rebound in the future – when is that future? Don’t know the answer to that question!
Fain Appraisal Services have spent a career taking the time necessary to provide you with a fair and trustworthy value conclusion. Sometimes it takes a little longer and it may cost a little more – but if you want or need a reliable conclusion of market value then Fain Appraisal Services would be an excellent choice for you to work with.
