Foreclosures in neighborhood hurt your home's value

A Bradenton couple recently found a buyer willing to pay $137,000 for their home. But the deal fell apart when the appraised value came in 12 percent lower - at $120,000.

It's a painful scene playing out all over the Tampa Bay area.

In Riverview, a homebuyer agreed to pay $162,000, but the appraisal came back at $150,000. A Trinity homeowner had a contract to sell for $207,000 - 6 percent more than the appraisal of $195,000.

All of these homes appraised for less than the amount a buyer was willing to pay because of one thing: too many foreclosures and distressed sales in the neighborhood, said David Teacher, who was hired to appraise the homes by the buyers' lenders.

"When there are bank-owned homes in basically the same condition that have sold or are listed for sale for cheaper, an appraiser has to consider them," Teacher said.

In this fragile real estate market, what your neighbor does has never mattered more. Sellers have to compete with distressed sellers, even if they're not distressed themselves.

Every time a home in your neighborhood, or especially on your street, sells at a fire-sale price, your home's value is likely to drop, too.

The issue has, at times, pitted real estate professionals, such as appraisers, builders and real estate agents, against one another.

Appraisers determine value, in part, by looking at comparable sales in the area. Teacher said he tries to find "regular" sales to use as comparables, but that's not possible in some neighborhoods with a large supply of distressed sales.

That said, he says some appraisers use the closest distressed sales and ignore comparable sales that would have rendered a higher value.

For example, he recently appraised a Palm Harbor home for 6 percent more than the bank ended up accepting. That sale will now affect other appraisals in the neighborhood, even though the appraisal was low.

Appraisals aren't just affecting regular Joes trying to sell their homes. Builders are increasingly being told by lenders that new homes drop in value so much during the construction process that they can't fund loans.

Jennifer Doerfel, executive vice president of the Tampa Bay Builders Association, said one of the reasons the values are dropping is because distressed sales nearby drag down the values.

The problem is, she said, foreclosed homes aren't worth as much as new homes.

"In most cases, these foreclosures and short sales aren't comparable at all," Doerfel said. "There's likely mold or other damage in the distressed home. The home that's in better condition should be worth more."

This year's showcase home for the builders association was expected to have a value of $1.3 million, she said. But now that it's completed, the appraised value is less than it cost the builder to construct it.

So what can you do if you disagree with a low-ball appraisal on your home?

Some homeowners have had success by asking their real estate agents to fight it, Teacher said. If the appraiser overlooked higher comparable sales, you can point those out to the lender and buyer.

Sometimes, he said, it makes a difference.

But if you live in a neighborhood hit hard by foreclosures, you're likely going to have to live with it.



www.anthonycruzjr.com
www.twitter.com/fla_real_estate