Miami Beach Real Estate circumstances change on a regular basis and it’s good to stay informed, but almost impossible to stay on top of trends unless you are knee deep in the business. That’s our job here at Miamism, to let you know what’s going on in order to prepare you for certain scenarios and help you become a better informed consumer.
You may have heard both Realtors and Mortgage brokers complain about appraisals and how these are killing so many Miami Beach real estate deals lately. It used to be that a home seller could pay for an appraisal to get a better idea of how to price their property but that is no longer the case – you can expect an appraisal prepared by a bank for financing purposes to be more conservative. (please read You think your home is worth how much?)
It’s gotten to a point where 2 different appraisers chosen by the same bank and looking at the same exact property, can arrive at totally different figures. How could that be possible if appraisers should all follow the same guidelines?
According to Florida Real Estate Principles “Appraising is considered to be an art, not a science, although the appraisal process involves mathematical calculations, appraisers also use their own judgement when appraising real property” – so of course it helps if the appraiser knows the area they are working in and the idiosyncrasies associated with each market, but this is very seldom the case.
We recently represented a buyer and executed a contract on a property – both buyer and seller agreed on a price and were waiting on bank’s appraisal to finalize financing. The deal fell apart because the appraisal came in way below the agreed upon price. We knew we were in trouble when the appraiser called us three times to guide him to the property because he was lost and when he finally arrived we noticed his license plate was from none other than Minnesota (no offence to my dear friend Teresa Boardman) – but we can agree that Miami Beach real estate is totally different than St. Paul’s.
This appraiser used properties that were far from being comparables, from areas that made no sense and property types that were beyond absurd. Although we requested an appraisal review, this process was out of our control and we could not salvage the deal. One week later the listing agent and owner accepted a deal that was 10% lower than our client’s offer, went through the same process, but in that case, the appraisal came in higher than our original offer. So how can 2 appraisers come up with a value of a property with over a 20% disparity? Talk about a loss loss situation for both our buyer and the seller – the only one that came out benefiting from the disparity was the final buyer who got a great deal because of a major flaw in the financing sector.
In our opinion, a few years back, appraisals were coming in artificially high. In today’s market, appraisals are coming in artificially low. We see sellers today pulling their properties off the market because of appraisal issues, we also see a lot of frustrated buyers and we see these issues only getting worse. Some people claim that these matters are natural ways for markets to correct themselves, we just shake our heads and are ready to address problems on a one by one basis and prepare you for worst case scenarios. It used to be that a property was ultimately worth what a buyer was willing to pay and a seller willing to accept…recently, we question the validity of that phrase.