That's the question on the minds of many investors , but it's become increasingly tough to answer, even for the pros.
This article points out just how unstable comparables are. The bottom line - the sales price is set by a willing buyer and a willing seller.
Instability in the region's housing market is making it difficult to determine values, according to mortgage brokers and real estate appraisers. "It's miserable," said Karen Mann, who runs a small East Bay appraisal firm called Mann & Associates. "I've been in the business 28 years, and this is the worst downturn I've seen."
While Mann's Discovery Bay office is in one of the hardest-hit parts of the Bay Area, appraisers in San Francisco and other places where the market has fared better echoed many of her concerns. "They are shooting down the value of appraisals like I've never seen before," said Rick Gordillo, whose practice specializes in residential real estate.
"It's almost as if they don't want the business. They are turning away loans even when the values are there."
Even seemingly low appraisals are being questioned by lenders, who have been burned by the mortgage crisis and are now scrutinizing loan applications with much more care, said Ed Craine, vice president of the California Association of Mortgage Brokers.
During the housing boom in the first half of the decade, lenders typically evaluated appraisals submitted as part of a loan application by running their own comparisons from their desks. Now, banks are much more likely to send appraisers out into the field to drive by a property and the nearby homes listed as comparables to help establish a home's value.
"You can have what I call a very realistic or conservative appraisal done by an independent fee appraiser and that will go to a lender's underwriter, and the lender can come back saying we don't think that value is accurate," said Craine, who is also president of the San Francisco mortgage brokerage Smith-Craine Finance. "It used to only happen once in a blue moon. Now it's happening maybe 1 in every 10 times."
Finding the right price is crucial, not just for getting a sale closed, but also because it plays a huge role in attracting buyers.
The down market has meant that more real estate agents are seeking an appraisal early in the sales process, asking for help determining the price before they put the home up for sale, Mann said.
"I'm seeing an increase of about 20 percent in Realtor activity," she said. "In a market like this, you have to be as exact with the listing price as possible. If you over-list, you run the risk of staying on the market too long and becoming stale."
The art of appraising a home is about number-crunching - putting together a series of comparable recent real estate transactions to help determine the value of a property. The declining market makes it particularly important to use current sales numbers rather than relying on information that is 3 to 6 months old, which in a more stable market is considered a perfectly acceptable comparison, experts said.
The tougher guidelines and declining home prices throughout most of the Bay Area mean that what goes into an appraisal - both those required by lenders for home purchases and those done for homeowners who are refinancing their loans - has changed.
The Appraisal Institute, a trade group with 32,000 members, has even begun offering a series of daylong seminars in cities across the country to retrain its members. The lectures are designed to help the group's appraisers adapt to the current market and learn how to better evaluate data.
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