We are starting to show the first true signs of coming out of the "great recession" and the real estate market will initially be searching to find a new identity with a whole new set of rules with which to live. Depending on where you live, property values have dropped over the past five years from a couple of percentage points up to forty and fifty percent in some areas.
Around Greenville, we have been relatively lucky to have come out of the downturn without too much of a loss. Now don't get me wrong, we have certainly seen some tough times. Foreclosures are still quite prevalent and the effects of what may be a substantial shadow inventory are yet to be fully recognized. With every foreclosure, you can see other home values suffer. The main reason comes down to simple math. When comparable homes sell in foreclosure, they typically will sell for much less, thus causing the good homes potential appraised value to be less.
The question I hear many folks asking is why would the bank appraiser use a foreclosure as a comparable? The answer is that one of the main restrictions that have been imposed on bank appraisers is to use comparable sales within the same neighborhood first. If there are two foreclosures and only one other sale within the past year, it can really affect the appraised value of some exceptional homes. These restrictions were imposed for good reasons, mainly so that homes don't sell for more than they should and create future foreclosure problems and bad investments for the banks. Yes, that is why we had the recession to begin with, so the government certainly doesn't want that to happen again.
So what are we to do with exceptional homes in a recovering economy? One has to be a better salesperson for one. When I put a home on the market that has had tremendous improvements made to it over the last couple of homes that have sold, I have to make sure I highlight those improvements and hope the prospects see the value. Then, when the appraiser comes around, be an even better salesperson! It appears that the general public is anxiously waiting to jump back out there, and they are certainly going to be interested in the more "move in" condition homes. We just have to sell that value to the lender as well and hope they agree. It will be the only way we can start to get our property values back up and our biggest investment (our homes) back to the level where they once were.
J. J. Bowers
Realtor/owner - greenvillescrealestatetoday.com