WORKINGEFFECTIVELYWITHTODAY S APPRAISERS December 19, 2013 Oscar Wei Senior Research Analyst
Problems reported by REALTORS : Out-of-town appraisers who are not familiar with the local market conditions Inappropriate comparisons Turn-around time by both appraisers and banks is slow Excessive lender demands SOURCE: NAR Realtors Confidence Index Survey, Sept 2012
Impact to Home Sales 63% reported no contract problems related to home appraisals 14% said a contract was renegotiated to a lower sales price as a result of a low valuation 12% said a contract was cancelled due to an appraised value under the price negotiated between the buyer and the seller 9% reported a contract was delayed 2% reported a contract problem due to a high appraisal SOURCE: NAR Realtor Confidence Index Survey, Aug 2013
Survey Methodology 801 online surveys conducted in August 2013 Respondents: REALTORS who closed a real estate transaction between August 2012 and August 2013 Sample error: 3.3% at 95% confidence interval
Type of Client Represented Buyer Seller Both 23% 40% 37% Q: During your last transaction where the buyer and seller entered into a valid contract and the transaction closed escrow or cancelled, which type of client did you represent?
Property Location 60% 55% 50% 40% 30% 20% 10% 24% 21% 0% Northern California Southern California Other Q: In which county was the property located?
MostTransactionsWere Single Family Homes 4% 4% 2% 1% 12% 77% Single Family Home Condominium Townhome Other Land Maufactured home Q: What type of property was your last transaction?
Final Sale Price Mean: $969,153 Median: $427,000 Mode: $350,000 Maximum: $81,565,000 Minimum: $35,000 Q: What was the final sales price of your last transaction?
Final Sale Price 1,000,000+ 13% 800,000-999,999 7% 600,000-799,999 12% 400,000-599,999 23% 200,000-399,999 29% < 200,000 16% 0% 5% 10% 15% 20% 25% 30% 35% Q: What was the final sales price of your last transaction?
Most BuyersAcquired Financing All Cash 24% Financing 76% Q: How did the buyer pay for the property?
Share ofcash Buyers decreases for the first time after 7 years of continuous Increase 35% % of All Cash Sales 30% 27% 25% 20% 15% Over a quarter of buyers paid with all cash The share of all cash buyers had been on the rise until this year SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS 10% 5% 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013
Majority of Buyers DidAppraisals No 23% Yes 77% Q: Did the buyer have an appraisal done on the property?
Most Buyers Did NotWaiveAppraisalContingency Yes 31% No 69% Q: Did the buyer waive the appraisal contingency?
THE APPRAISAL
4/10 REALTORS had DirectContact w/appraiser No 60% Yes 40% 0% 10% 20% 30% 40% 50% 60% Q: Did you have direct contact with the appraiser at any time during the transaction?
Appraisers CompanyAffiliation Mostly Unknown 89% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 11% Company known Unknown Q: With which company was the appraiser affiliated?
AppraisedValue 15% 85% Appraisal Value Final Sales Price Appraisal Value < Final Sales Price Q: What was the appraised value of that property?
Appraised Value Final Sale Price by Final Sale Price Ranges $1,000,000+ 87% $500,001 - $1,000,000 78% $300,001 - $500,000 84% $300,000 93% 70% 75% 80% 85% 90% 95% Q: What was the appraised value of that property?
Type of Properties in Appraiser Report 60% 52% 50% 40% 38% 30% 20% 10% 12% 17% 10% 0% Q: What type of properties did the appraiser include in his/her report?
The Median Price for Equity Sales Declined for the 4 th Consecutive Month $500,000 Equity Sales Short Sale REO $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 SERIES: Distressed Median Price SOURCE: CALIFORNIA ASSOCIATION OF REALTORS
MostAppraisers are Familiar w/ Local Markets 34% 61% Yes No Don't Know/Unsure 5% Q: Was the appraiser familiar with the local market?
30% 25% 20% 15% Satisfaction Rating ofappraisers (Mean: 7.1, Median: 8) 24% 22% 22% 10% 5% 4% 3% 4% 2% 5% 7% 8% 0% Q: On a scale of one to 10, with one being very dissatisfied and 10 being very satisfied, how satisfied were you with the appraiser?
Satisfaction Level by Sales Price Median Mean $300,000 8 7.26 $300,001 $500,000 7 6.96 $500,001 $1,000,000 8 7.16 $1,000,000+ 8 7.05 Q: What was the final sales price of your last transaction?
Satisfaction Level: Non-Distressed vs. Distressed Mean Median Used Non-Distressed Properties Only in Appraisal Used Both Distressed and Non-Distressed Properties in Appraisal 7.0 8 7.1 8
Satisfaction Level: AppraisedValue above or below Final Price Mean Median Appraised Value < Final Price 5.0 6 Appraised Value > Final Price 7.5 8 Q: What was the final sales price of your last transaction?
REALTORS Satisfaction Level withappraisers Mean Median Appraiser Familiar with Local Markets Appraiser Not Familiar with Local Markets 7.6 8 4 3 Not Sure/Don t Know 5.4 6 Q: Was the appraiser familiar with the local market?
Top Reasons for Satisfaction No problems or issues 13.8% Know the area/market 8.3% Property appraised at market value price 8.1% Timely Manner, Quick Turnaround 5.8% Professional, Polite, Friendly 4.6% Property appraised at a higher value than expected 3.2% 0% 2% 4% 6% 8% 10% 12% 14% 16%
Top Reasons for Dissatisfaction Low appraisal 5.8% Appraiser did not know the area 4.8% Slow, take too long 4.0% Communication problems 0.6% 0% 1% 2% 3% 4% 5% 6% 7%
CLOSING REMARKS
Share of Equity Sales Decreased for the FirstTime Since December 2012 100% Equity Sales 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% SERIES: Distressed Sales SOURCE: CALIFORNIA ASSOCIATION OF REALTORS Short Sale REO
Median PriceYTY % Chg: US vs. CA 40% CA US 30% 20% 10% 0% -10% -20% -30% -40% -50% SERIES: 30Yr FRM, 10Yr T-Bond SOURCE: Federal Home Loan Mortgage Corporation, Federal Reserve Board
Issues with HomeAppraisal Should Improve in 2014 As more distressed properties are clear Home prices continue to rise Lending standards loosen up
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