As The Tarrant County Market Slows, Attention Turns to Appraisals

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It’s happening.  The real estate market in Tarrant County is officially slowing down.  This past week, the Fort Worth Housing Report indicated that the number of closed homes in July 2019 was down nearly 4 percent from July 2018.

Inventory of homes in Tarrant County has increased, and total days on market, from listing-to-close, jumped six days from 2018 to 2019.  Prices have barely increased in the past 12 months, and this could be why we are starting to see issues with appraisals.

What’s The Home Worth?

Regardless of we want to believe, we don’t live in a free-market society.  If a home is listed at $X and a buyer is willing to pay $X (or in recent years more than $X) the true value of the home is only going to be what the bank is willing to lend, and that all starts with the biggest enigma of all: the appraisal.

Back in the Great Recession circa 2010-2012, the real estate community had frequent issues with appraisals.  Appraisers were not allowed to be hand-selected by lenders anymore (probably a good thing) and many appraisers didn’t even want to talk to the listing agent on a property.

Because of new government restrictions and regulations, appraisers were being watched closely by various entities.  The fear of getting a poor rating or accused of making loose valuations was causing many appraisers to over-tighten their criteria and findings.

Combine that fear with possible short sales or bankruptcy sales in any given neighborhood and appraisals were all over the board.  This made it difficult for sellers and listing agents to price a home correctly and caused a lot of heartburn for everyone.

What is a Comp?

The way many appraisers have explained it, their job is to find the most similar home in size, age, bedroom count, and location to the home being appraised.  The general rule of thumb is to use homes 20 percent above-and-below the size of the subject (i.e. 2,000 ft. home = search for homes 1,600 to 2,400 ft.), same bedroom count or room count, the same number of stories, and try not to go back more than 90 days.

Side note: isn’t it ridiculous that everyone else involved in a real estate transaction looks forward, yet appraisers look to the past to determine value. How bizarre is that?

Nowhere in the “Appraisers Guidebook to Success” is valuation compared to the infamous price per foot.  We’ve discussed that over and over and yet agents and others still try to believe that there is a correlation between price per foot and the value of the home.

Why Bad Appraisals Now?

Once the short sales, low sales, or bankruptcy sales of the Recession more-or-less cleared out, it seemed as if the appraisals and sales prices were stabilizing.  From time to time an appraisal might come back a few bucks shy of the contract price, but in those instances, something can always be worked out.

That is, until recently.

Surveying real estate agents in Tarrant County, in a variety of areas and price points, it seems as if the disconnect between sales or contract price and the appraised price is once again rearing its ugly head.

Based on the numbers shared from the Fort Worth Housing Report, it is a fact that the real estate market in Tarrant County is slowing down. Don’t panic, but deal with reality.

As a home sits available on the market for a longer period of time, the sellers start getting antsy.  Antsy sellers tend to be willing to accept a lower offer.  When lower offers are accepted that home can be used as a comparison by an appraiser — thus a lower appraisal is created.

When this happens a handful of times, the overall price point for that area can be reset.  This is good for buyers but not good for appraisals, sellers, or listing agents.

What To Do?

Contrary to what some sellers or listing agents might say, a reset of prices isn’t a bad thing.  Homes are still increasing in value.  Prices remain high across locations, price points and sizes of homes.  The end of the world is not near.

It’s time to get real.  Listing agents need to do a better job of pricing homes.  Better data and criteria need to be used to come up with a realistic price of a home that is certain to appraise.  Sellers also need to stop thinking it’s 2015-2018 and realize it’s a buyer’s market more and more and not think they can sell their home for previous market prices.

Stop!

Stop pointing to a neighbor’s home that sold 18 months ago and saying, “My home is better than theirs so mine should sell for more!”

Stop trying to use price per foot of an 1,800-square-foot, single-story home with three bedrooms when pricing a 3,500-square-foot, two-story home with five bedrooms.  It’s not an apples-to-apples comparison.

Stop blaming the appraiser (some of the time) when they aren’t pulling the specific comparisons that justify the asking price.

Yes, there are appraisers out there that are doing their profession, sellers, or listing agents a disservice.  If there is a legitimate argument that can be made when dealing with a low appraisal, get your lender and agent involved and state your case.

Unfortunately, many appraisers are still so afraid of being called out by watchdog bureaucrats they often times will not reconsider their handiwork.   But there are good appraisers who will be impartial and will consider a price change if the information is accurate.

Get Used to It

It’s my bow tie’d opinion that the real estate community will experience more appraisal discomfort in the coming year or two.  As prices reset and home prices plateau or even drop a bit, low appraisals are sure to follow. Just get ready.

All the more reason to have a strong real estate sales professional working for you!

Well, that’s all from Tarrant County Tuesday this week, Dirty Readers.  Thanks for reading and following and sharing!  As always, if you have questions, comments or great ideas for a post … hit me up!


Seth Fowler is a licensed Real Estate Sales Professional for Williams Trew Real Estate in Fort Worth, TX.  Statements and opinions are his and his alone.  Seth has been involved with the home sales and real estate industry in the Fort Worth area since 2004.  He and his family have lived in the area for over 17  years.  Seth also loves bow ties!  You can reach Seth at: 817.980.6636 or [email protected].  If you are looking for a Real Estate Sherpa to help you buy or sell … give Seth a call!

Seth Fowler is a licensed real estate agent with Williams Trew Real Estate in Fort Worth. Statements and opinions are his own.

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