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|Mortgage professionals needing a Certified Residential Appraisal|
|Reinstating a HELOC (Home Equity Line of Credit)|
|Employee relocation appraisals|
|Pre-Listing to determine: probable sale price, list/sale ratio, trend analysis, liquidation value, probable listing time and appropriate list price, etc. |
|A reliable expert witness for court cases involving the value of real estate in New Jersey|
|Appraisal review: Reviewing the work of other appraisers. We offer desktop and field review services both current and retrospective/forensic|
|Appealing property taxes (assessment appeal)|
|Determining market value on real estate related to a bankruptcy (REO), estate sale, reverse mortgage, etc.|
|Getting an accurate home measurement and floor plan / sketch. |
|Divorce settlements when an accurate value estimate of shared real estate is required|
2013 New Jersey Housing Market
After years of hovering at record lows, New Jersey’s home prices are poised to increase in 2013.
According to an article in The Record (“Appraiser sees NJ home prices rising in 2013, after long slide,” Oct. 26, 2012), New Jersey appraiser Jeffrey Otteau said he expects prices to rise gradually, taking until 2020 to return to 2005 levels.
The article reads in part, “‘the recovery in the housing market is only just starting,’ said Otteau, of East Brunswick, whose housing forecasts are followed by the real estate industry. He said demand is stronger in Bergen County than in Passaic, which has been hit hard by foreclosures and other economic distress in the cities.
“According to Otteau’s calculations, New Jersey home prices have been basically flat this year. By contrast, the S&P/Case-Shiller index, which uses different ways to track prices, found New York metropolitan-area values dropped 2.6 percent from July 2011 to July 2012, its most recent figures.
“The number of sales in New Jersey has rebounded to the fastest pace since 2007, though it remains below the boom levels of 2005, Otteau said. Lower home prices, rock-bottom mortgage rates and a growing confidence in the economic recovery have lured buyers back, Otteau told real estate agents at his semiannual seminar in East Hanover. ‘Fewer and fewer people are losing their jobs,’ Otteau said. ‘That’s part of the housing recovery.’”
Otteau said that after dropping roughly 27 percent since the peak of the housing boom in the mid-2000s, New Jersey’s median home prices will increase about 3 percent in 2013, owing in large part to heightened demand. As prices climb, prospective buyers will throw caution to the wind and buy the homes they have been eyeing, he added.
Would-be buyers won’t all have the ability to purchase a home this year, however, said Otteau. Many will remain on the sidelines as lenders are requiring large down payments, high credit scores, and relatively high incomes, he added. That leaves many of New Jersey’s un- and underemployed out of the loop. Although the state is adding jobs on a regular basis, it is still suffering from high unemployment, with the state unemployment rate at 9.8 percent in late 2012.
According to the New Jersey Cooperator (“The 2013 Market Forecast”), a significant reason New Jersey continues to trail behind some other states in emerging from the Great Recession is the damage it sustained as a result of Hurricane Sandy, the hurricane that struck the Northeast in late 2012. The publication reported that “damages inflicted by Hurricane Sandy are expected to exceed $50 billion, with New Jersey absorbing 30 percent of those losses as thousands of homeowners in the Garden State file claims for flood and wind damage. A preliminary cost analysis of Hurricane Sandy-related storm damage in New Jersey compiled by Governor Chris Christie’s administration puts the number at $29.4 billion.”
The hurricane swept away a number of Jersey Shore houses and submerged portions of Hoboken and Jersey City. “The governor has said that more than 30,000 homes and businesses were destroyed or sustained substantial damage from … the storm, and 230,000 New Jerseyites have registered for Federal Emergency Management Agency assistance,” according to the article.
“‘The scope of the devastation the storm inflicted on New Jersey is unprecedented,’ says Department of Environmental Protection commissioner Bob Martin. ‘The storm has left millions of cubic yards of materials that need to be hauled away. So far the DEP has approved 100 temporary debris management areas to help ensure a steady flow of debris from communities that were impacted by Hurricane Sandy.’
“‘If there’s one thing I can say about New Jersey residents, it’s that we’re resilient,’ says New Jersey Association of Realtors (NJAR) chief executive officer Jarrod C. Grasso, in a statement released shortly after Hurricane Sandy made landfall in New Jersey. ‘The true test of Garden State resilience is happening now, as realtors, residents and neighbors work to recover and rebuild homes they’ve known for years, lifetimes and even generations. The impact of Hurricane Sandy on New Jersey property values is yet to be seen, but the teamwork demonstrated by our governmental leaders, residents, first responders, workers, and volunteers has been outstanding and is a sign of strength and pride in our great state.’”
In November of 2012, NJAR released its third quarter home price report, which offered positive news about the future of New Jersey real estate sales. “‘Home sales continue to trend up and most October transactions were completed by the time the storm hit, but the growing demand with limited inventory is pressuring home prices in the rest of the country,’ noted Lawrence Yun, NAR chief economist. ‘We expect an impact on Northeastern home sales in the coming months from a pause and delays in storm-impacted regions.’
“‘We have so many pockets of real estate in New Jersey that different areas are like different worlds,” says Gary Celeste, a sales associate with Coldwell Banker in Bedminster. ‘There was a lot of devastation down the shore but those were second houses for a lot of people especially around the LBI [Long Beach Island] area, so that’s not really affecting our real estate, per se. My area in North Central Jersey (Somerset, Essex, Union, Morris counties) wasn’t really affected. But you’ve got insurance companies calling around trying to get people into rentals, or homes that were on the market while they rebuild, and for the most part the insurance companies are paying more than people were asking.’”
NAR President Gary Thomas urged potential buyers to avoid taking current record low interest rates for granted. “‘Even with rising home prices, we’ll continue to see favorable housing affordability conditions over the coming years, but they won’t last forever,’ he says. ‘Inflationary pressures are expected to build during the next two years. As a result mortgage interest rates will also rise with inflation.’”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional fixed-rate mortgage fell to a record low 3.38 percent in October from 3.47 percent in September; the rate was 4.07 percent in October 2011. (housingpredictor.com)
Supporting Appraisal Adjustments
Let’s be honest:
(1) How many appraisers have a set of adjustments that seem to work - that they might have used for years but have never tested?
(2) How often do we guess at an adjustment either because we do not know how to determine the adjustment or just don’t want (or have the time) to do the research and analysis?
(3) How often do appraisers, challenged on an adjustment and unable to defend it, bend to unreasonable requests?
It is possible to do an appraisal without adjusting but we have found by adjusting we can narrow the range of indicated values from the comparables. However, if our adjustments are wrong, we might find we are not narrowing the range but actually making it wider. I find that lot size and/or age adjustments might not be helpful because the market does not always account for those numeric differences.
If a comp search reveals nearly identical homes than you may be able to deduce an adjustment (an actual contribution of value attributable to a single variable/feature). The more variables you have, the more comparables you may need to account for each difference but what do you do with a difference you cannot find in any of your comparables (such as a view)?
Using Paired Sales to Determine Adjustments
Subject is a 1,600 square foot house with a view but there are no sales in the past year of similar size homes with comparable views. However, there are four sales of the same plan without views in the past 120 days – ranging in sales price from $200,000 to $225,000. So first we would expect the subject property to have a value in excess of $200,000.
There is a 1,000 square foot house with a comparable view – that sold for $165,000 and a model match without a view that sold for $140,000 – for a difference of: $25,000. Now it looks like the contributory value of a comparable view might be $25,000 but that is for a smaller house.
There are two sales of a 2,000 square foot plan with views for $250,000 and $260,000 and model matches without the view for $220,000 and $230,000. So the range here is: $20,000 to $40,000 (average at: $30,000).
Using History and Percentages to Determine Adjustments
As a second test you find the subject property sold two years ago for $184,000 and model matches without the view were selling for $160,000 – now that difference is $24,000 (15 percent). So determining 15 percent of the two current model match sales at $200,000 and $225,000 will result in a possible view value range of $30,000 to $33,750.
Conclusion for the View Adjustment Determination
Smaller homes with and without the view indicated a $25,000 premium for the view. Larger homes (on average) pull up to $40,000 more for the view (average at $30,000). Prior sales of subject with the view and comparables without the view found the view added 15 percent to value – which applied to the non-view current comparables equals a value for the view from about $30,000 to $34,000. View value adjustment of $32,000 is chosen.
Using Sale/Re-sale of the Same Property to Determine Adjustments
Subject sold for $100,000 on January 1, 2000 as an REO in fair condition.
Re-sold for $140,000 on April 1, 2000 after a $20,000 rehab (in a stable market).
From that information we can conclude a condition adjustment of $40,000 – for nothing else has changed.
Subject sold for $100,000 on January 1, 2000.
Sold again on January 1, 2002 for $140,000, which equals $40,000 in 24 months or +$1,666 per month.
Now you can take that $1,666 per month to current comparables to account for appreciation. Many appraisers are doing time adjustments wrong – by using the close of escrow date. Here is a quote from Fannie Mae: “Time adjustments must be representative of the market and supported by comparable sales or other market evidence. The adjustment must reflect the time that elapsed between the contract dates (the date of the meetings of the minds) for the comparable sales and the effective date of the appraisal for the subject property.”
Using Published Data to Determine Adjustments
Data shows the median home prices in the county were going down between January and April but started moving up in May. The city home prices hit bottom in March and began moving up in April but are still below the median from January. The monthly increase from June to July for the County is $6,000 and $5,000 for the city. The appraiser could choose a time adjustment of $140 per day applied to the contract (meeting of the minds) dates of the comparable sales.