Category Archives: Home Appraisal

Local Real Estate Value Trends North of Boston 128/93 Area

2015 was another great year!  A year ago, we were talking about the strong year we had in 2014 and here we are a year later and the experience has been pretty much the same.  We continue to show higher than historical volume, and values have increased as well.   Now, as we proceed along into 2016, I wanted to look at how much the market has changed in the past year as well as how we compare to the values of 2005 at the previous market high.

In Woburn, the single family market average sales price finished higher than the previous year.  Sales volume was higher too.  The higher volume occurred in spite of the low inventory levels throughout the year.    On a relative basis, Woburn is more affordable than the other local towns, but maintains a similar growth in home value.  Interest rates remained low and this contributed to first time buyers being able to afford homes even as prices increased.  Interest rates in 2016 are expected to rise slightly.

Looking back over 2015, in the north of Boston area, we saw market time decrease, bidding wars with multiple offers, fewer distressed homes, and continued overall positive feeling about the market.

Statistics and trends are a favorite tool for me.  I can get a sense of where the market is going by looking at the indicators.  Although I have created charts for many individual towns, my favorite chart, which is included with this blog, is of the local 128/93 towns compared to each other.  These include Reading, Burlington, Melrose, Stoneham, Wakefield, Wilmington and Woburn.

Here is a table for these local towns that captures the trend data:

Town Average Sale Price

2015

% Change

2014 to 2015

% Change

from 2005 High

Reading $553,508 +6.47% +15.19%
Burlington $547,275 +6.82% +24.01%
Melrose $528,488 +6.50% +16.56%
Stoneham $494,653 +7.16% +9.19%
Wakefield $492,971 +4.90% +9.50%
Wilmington $461,574 +9.08% +1.71%
Woburn $438,681 +8.47% +8.47%

 

Interestingly, all of the local towns have shown strong gains over the previous year.  A year ago, not all of the towns had exceeded the highs of 2005, but at the end of 2015, all have surpassed the highs of 2005.   Looking ahead, let’s hope for continued growth in local real estate values, and a continued strong real estate market.

Mulittown

Roland Crop 2011 jpeg (1)About the Author: Roland Spadafora is one of the broker owners of RE/MAX Legacy and is known around the office as the expert in market trends and stats. You can learn more about him on his website www.spadaforateam.com

 


appraisal guy 2There are a lot of misconceptions concerning the purpose and process of the appraisal report and the appraiser.
Let’s start with the person.  According to The Appraisal Foundation, “an appraiser is one who develops and reports an opinion of value on a specific type of property”.

 

This definition leads us to the purpose of the appraisal.
The reporting of the OPINION of value is what we call the appraisal.  Note, my over exaggerated bold and capped OPINION.  I state this because most people believe that valuing a property is a science because it has all those numbers and numbers belong with equations which prove or disprove results.  This is not entirely the case for appraisals.  Appraisals are more like finely crafted pieces of art.  All kidding aside, the reason the appraisal is an art is largely in part because of the amount of emotion in real estate transactions.  How do you quantify emotion?  You step into your 49th open house and you just know.  You KNOW, again over-emphasizing here, this is your home and you are not going to lose it without a good fight to the finish.  You are even willing to, dare I say, over-pay for it.  Because you have falling for it.  Your emotions have made your decision for you.  Now don’t worry, you are just like the rest of us.  We all purchase based on how it makes us feel and how we believe it will make us feel in the future.  I do it every day.

 

The purpose of the appraisal report is primarily for the lenders (aka the Bank).  The appraisal simply reports to the bank what similar properties are selling for in the neighborhood.  The bank wants to know if similar “emotional” responses are consistent in the neighborhood.  Why?  Because every purchase of a home defines the market value of your property.  Market value, according to The Appraisal Institute, “The most probable price that the specified property interest should sell for in a competitive market after a reasonable exposure time, as of a specified date, in cash, or in terms equivalent to cash, under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, for self-interest, and assuming neither is under duress.”

 

For example, currently in the Metro Boston and Woburn area we are seeing some days on market, the number of days a property lists on the open market, at or below one week and we are seeing selling prices above asking prices (list price).  The appraisal report must report this and be consistent with what is happening in the current market.  This leads us to the process of the appraisal.

 

The process is similar for most appraisers.  The appraiser guy or gal comes to the property for inspection, interior and exterior.  They will research and view the neighborhood.  They will verify property data with the assessor and/or building inspector. They will research the market trends of the past year paying particular attention to what the current trends are within the past month to 3 months.  Then they will research sales in the neighborhood and pull the best available sales that most accurately reflect the subject property in terms of Location, Square Footage, Style, Age, Condition, Bedrooms, Bathrooms, Acreage, Amenities, Topography, View, Date of sale, Type of sale, Days on market, etc…  The comparable selection is like 5th grade science class when you dissected the frog saturated in formaldehyde.  It’s that experience you wish you could remember to forget.  After all the differences are valued out there is a range of value from the adjusted comparable sales.  The final estimated opinion of value is typically within this range.  The range, again, reflects the art of the appraisal because it is an opinion with the range.

 

There are various reasons, other than for a lending transaction, to have an appraisal completed on your property.  If you are ready to embark on a renovation project, better hold the horses and find out if your investment will have a good return.  I’ve saved families from making this mistake a few times.  What about if a loved one is reaching the end of their life and you are doing the final preparations for their will.  Finding the value of the home can help sort out any loose ends and help the family focus on what matters.  One other reason would be if a couple finds themselves unable to continue in marriage and needs to divorce.  Typically the largest asset to divide is the property.  You need an unbiased appraisal on the property in all these scenarios.

You can go to our website www.theappraiserguy.com to learn more by clicking the links.  The document added to this blog is from The Appraisal Institute and helps further distinguish the purpose and process of the appraisal.

 

TAF BorrowersInfographic

No one can deny that we are in an awkward stage in real estate right now.  With homes selling well above asking price due to low inventory and high demand, it is impossible to know the true value of a home at the inception of the listing.  Unfortunately, those days of relying on previous comparable sales are out the window and such homes are only used as a mere gauge when listing a property.  As a result of such pricing flux, appraisals are often and frequently conflicting.   This can sometimes pose a problem for both parties in the transaction.

In a typical transaction where the Buyer is seeking financing from an institutional lender,  the Buyer’s lender sends an appraiser out to the property in order to set a value to the home.  Said value is based on several factors including but not limited to: the home’s physical makeup (square footage, number of bedrooms/bathrooms, amenities, etc.), where it is located, and most importantly, what other comparable homes in the area sold for in the last few months.  The last factor poses the biggest problem when determining a home’s value.  Because homes have only recently been selling higher than their actual values, there are not enough, if any, comparable homes that have sold within the past few months that reflect such pricing increase.  The end result…the home appraises for lower than the agreed upon price.

From a Buyer’s standpoint, this means that the lender will probably deny financing because the lender will not loan money for a property that is worth less than the agreed upon price.  If the Buyer’s lender will allow the Buyer to borrow money, it will usually require the Buyer putting more money down if they choose.   This result would usually allow the Buyer to contractually get out of the agreement and receive a full refund on all their deposits. From a Seller’s perspective, a decision must be made: either drop the purchase price to the appraised value, or find another Buyer.  Either situation is not ideal to a Seller.

Other scenarios however, can pose more complex situations and results.  In the case where a Buyer is paying cash and they opt to do an independent appraisal, the appraisal could come in lower than the agreed upon purchase price, which would alarm the Buyer that they may be overpaying for a home.  In another case where the Buyer is only financing a small amount of money where there is plenty of equity for the lender to finance the desired amount, it could be seen that the Buyer is overpaying for the home as well.  In these situations, it is always best to put a separate contingency in the Contract to Purchase and the Purchase and Sales Agreement which states something to the effect of “This Agreement is subject to the property appraising at or exceeding the purchase price, failing which all deposits given by Buyer shall be forthwith refunded and this agreement shall be null and void without any recourse to the Parties hereto.” This will allow the Buyer the option of either backing out of the contract if the property does not appraise for the contract price or purchasing the property despite  the appraised value being lower, hoping that the home’s appraised value will eventually increase. On the Seller’s end, a way to ensure that a Buyer will purchase the property despite a low appraisal is to insert a clause in the Contract to Purchase and the Purchase and Sales Agreement which states something like “In the event the appraisal is lower than the agreed upon purchase price, Buyer agrees that it shall not be the cause of termination of this agreement and shall be obligated to purchase the subject property subject to the terms of this agreement.”      

Because of what is going on in the market, it is vital to always seek guidance from a knowledgeable and reputable real estate agent and attorney.  The days of cookie cutter transactions are no longer with us and it is vital to have people in your corner during these times.

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Jim - October 2010James A. Juliano is one of the founding partners of Scafidi Juliano & Hurd, LLP, managing the Woburn office location in Downtown Woburn Center.  He currently serves on the Woburn Conservation Commission.  Mr. Juliano is currently an active member in the Woburn Residents Environmental Network (WREN) and is a Director of the Friends of the Tri-Community Greenway, Inc. which is a non-profit corporation responsible for the formation and organization of the 6.63 mile bike path and park that will stretch through Stoneham, Woburn, and Winchester.  Mr. Juliano is also very active with the Eastern Middlesex Association of Realtors (EMAR) and serves on the Board of Directors for the Women’s Council of Realtors – Northern Region Massachusetts Chapter.

Mr. Juliano’s present areas of practice include residential and commercial real estate transactions, residential and commercial lending, land use and zoning, and Landlord/Tenant law.  Mr. Juliano can be reached at jjuliano@scafidijuliano.com or by phone at 781-210-4710, Ext. 102.

 


The spring market is here but, it seems a little different this year. Traditionally by April there are quite a few properties available for sale.  However in our current market this is not the case.  Listing inventory is down & when the supply does not meet the demand multiple offers and buyer frustration will follow.

When sale prices start to rise, it can also create a problem with bank appraisals.  Before a buyer can obtain a mortgage, the bank sends an appraiser to verify the sale price.  If there are not enough prior sales to compare, it can be difficult to justify the value. When this happens an adjustment must be made to either the sale price, or the buyer’s down payment. Otherwise the bank will not issue a commitment letter to the buyer.

In a market like this buyers have to be ready to sign on the dotted line if they want to be successful.  This is difficult to do when making such a big decision.  When investing a large amount of money time is needed to consider all options.

If you are thinking about selling, now is the time. The market is on the rise & with the lack of competition you could spring into a great deal!

About the Author: Sharon Potts is a Realtor at RE/MAX Legacy and looks forward to the  the spring market! You can contact her directly through her website at


“Hi!  Can you come over and appraise my house; I want to sell it and want to know how much it is worth.”  This is a common request that many real estate agents get and it includes a couple of misconceptions by the homeowner.

Today’s blog will address the word “appraise”.  In most states only a licensed appraiser can do an appraisal on a home.  They follow a very stringent set of guidelines, state and federal, when appraising a home.  In Massachusetts only a licensed appraiser can perform an appraisal.  What a licensed real estate agent in Massachusetts does is referred to by many names including but not limited to; a pricing study, market analysis, certified market analysis, comparative market analysis, comparable market analysis and so on.  When pricing a property for sale, Massachusetts law requires that a real estate agent gives a listing price range, in addition, when advising a buyer client the agent gives a range.  Keep in mind that these ranges are only valid at that point in time and changing market conditions can cause these ranges vary, sometimes as often as weekly.  Under both of these situations the seller and the buyer select the specific price point to list at or offer on a property.  An appraisal is one specific number, not a range.

About Author: Veronica McManus is a Certified Massachusetts Real Estate Instructor and has been with RE/MAX Legacy since its inception. She also holds many prestigious roles in the real estate industry including President-Elect of the Eastern Middlesex Association of REALTORS® 2012, and President-Elect of the MA State Chapter, Women’s Council of REALTORS® 2012.  She can be contacted at veronica.mcmanus@yahoo.com