Wednesday, October 03, 2018

I'm Not Taking Less Than My Appraisal

Dear Larry, I am under contract on a home in Cocoa Beach and I was able to negotiate a purchase price $10,000 less than a recent appraisal on the home. Did I get a good deal?

Maybe. Maybe not. Residential real estate appraisals are not definitive. An appraisal is the appraiser's opinion of the market value of a property on the date of the appraisal. In simple terms, the appraised value is the appraiser's opinion based on recent sales of nearby, comparable properties and adjusted for differences. Market value by definition is: the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.

That recent appraisal was probably a refinance appraisal. A refinance appraisal differs from a purchase appraisal in that the appraiser is not in possession of a contract with a price (target). He is essentially going in blind and must come up with appraised value using comps alone. That doesn't mean that a refinance appraisal is less accurate but it does leave room for a greater range without that target contract number. The buyer who negotiated for $10,000 less than the refinance appraisal shouldn't be surprised if the new appraisal done for their mortgage comes in closer to their contract price than the refinance number. I have seen sellers refuse a fair offer because it was less than their refinance appraisal number. Unless the appraiser is offering to buy the property for his appraised value, remember to treat it as what it is, an opinion of value. Appraiser Tom Horn did a good write-up on the differences in appraisals.

Inventory of condos and townhomes in Cocoa Beach and Cape Canaveral has been virtually unchanged all of 2018 and is hovering at 222 existing units for sale in the two cities this morning. In the month of September we had 48 units reported as closed. Twenty three of those were cash deals. Eleven were in oceanfront complexes and those eleven closed at prices between $270,000 for a 1st floor Cape Winds 2/2 weekly rental unit and $675,000 for an impressive 2525 square foot 5th floor SE corner penthouse at Hacienda del Mar in south Cocoa Beach. Median price of all 48 was $230,000.

Activity in single family homes remained slow with only seven closing in the month. All but one were in Cocoa Beach. Three non-waterfront homes sold in Cocoa Beach at prices between $320,000 and $350,000. Someone paid $1.5 MM for a gorgeous 9 year old 3836 square foot pool home on the open river in south Cocoa Beach. There are 73 homes currently for sale.

Green fees at the Cocoa Beach Country Club changed to the higher winter rates on October 1 and will stay there until after snowbird season. Golfers can save on the rates by purchasing advance rounds. Ask for details in the pro shop.

Raised on promises
She couldn't help thinkin' that there
Was a little more to life
Somewhere else
After all it was a great big world  
___________________________Tom Petty