We are currently working on a mortgage for a condo by the Jersey shore. Our clients are now buying their dream “second” home. After shopping and searching, a fab two- bedroom condo became available in a great complex.  The appraisal came in below the contract price. The clients (borrowers) are perfect, the condo is OVERPRICED, and the seller will not budge on the price! 

The buyers want it, so they put down more money.  The bank is still hassling us about the value and the declining market. After going back and forth with the appraiser, this is what he said:

“Property values have been declining for a variety of reasons well documented in news accounts. It is due in part to a correction of what was an over-inflated real estate market and the inability of buyers to get mortgages due to the credit crunch created by the sub prime mortgage issue. The subject was appraised at fair market value as of the date of this report. If values continue to decline the subject will probably be worth less in the future. It does not affect marketability as the subject can sell if needed, if it is priced correctly.”

If priced correctly is the operative word.  We now finally see prices falling as to where they should be.  What should a buyer do to avoid this problem?  When you are interested in making an offer on a home, ask the realtor not only to give you comps, but to give you the last five years sales records (transactions) of the home.  This way you can compare it to others on the market now as well as compare it to what the home sold for 5 years ago (if it did).  This is public record and is required to be included in the appraisal.  However, it would be nice to know first. At least you will not feel like you are getting ripped off.  Dale Robyn Siegel