When the Data Lags – The Current Real Estate Situation – Low Appraisals!

Hello Caton Team Readers – I took pen to paper today to share what we’re experiencing in 2021

If the Bay Area Real Estate Market wasn’t exciting enough, now we have a new problem – the data on current home sales is lagging, so much so, that appraisals are coming in low. 

The 2021 San Francisco Bay Area Real Estate market is a far cry from 2020. The demand for housing in the Bay Area is at an all time high – higher than ever.  It’s typical for agents with single family home listings to receive over 100 calls just from Realtors within days of coming on the market.  Some home are selling quickly while others are setting firm offer dates to mitigate the chaos. It’s definitely no time to panic if you’re selling Real Estate in the Bay Area – demand is there.  It’s also no time to panic if you’re buying in the Bay Area – as long as you’re focused on a realistic goal and pivot when needed. 

With many homes selling in under 7 days and low interest rates spurring a bonanza of refinances, banks are overwhelmed. The pool of local appraisers are backlogged, thus bringing in ‘out of area’ appraisers who are not familiar with the micro-climate of SF Bay Area Real Estate.  This pent up demand for appraisers has turned the customary 10 day turn around into a two week wait for the initial appointment and another week for the actual appraisal report. Closing escrow in 30 days has turned into a three ring circus, any sooner – well – I wouldn’t count on it. 

But that’s not the half of it! Even if your appraiser is local – we’re seeing dated comparables used, sales data from 2020 even 2019 not adjusted for appreciation or current demand. Though never an exact science; this gap in current value and sold data is effecting everyone – buyers and seller combined. 

The Industry Standard is to select comparable properties that sold 1 to 3 months back but no more than 6 months, then the appraiser must adjust accordingly for variance in condition, location, market, demand etc. But some are NOT doing what they should be doing and it shows.

Real Estate is a living, breathing entity.  It is constantly changing due to various factors – the economy, interest rates, stock market, consumer confidence, buyer demand, supply etc – So using sales data from 3rd Quarter 2020 – truly doesn’t reflect current demand as we begin Q2 of 2021. Because demand has increased significantly since then – and our buyers feel it. 

With pending sales taking 30-40 days to close, that valuable sales data doesn’t become official until after the closing and it’s mucking up the works on appraisals. In a multiple offer situation it may be difficult for a buyer to determine how much is too much to pay and the question remainds – will it appraise? Regardless, the home may be still worth the offer price and often paying the difference today helps a buyer get into a home as this market continues to see home prices increase and demand outpace supply. What you pay today may save you from paying more in the future. Please note, each client and situation is unique and this blog post does not apply to each situation.

If you’re a buyer in this market – and we know – The Caton Team loves to represent  buyers – it feels like homes are appreciating week over week – rather than month over month. With multiple offers – you’ve got to be aggressive, write your best offer, often non-contingent and hope for the best.  This pace is horrible and buyers (not to mention their agents) are exhausted and rightfully so. This market truly needs some tempering. Clients need time to review disclosures to make sound decisions with the greatest purchase of their lives.

When The Caton Team represents sellers, we encourage our clients to allow the home to be marketed for at minimum 1 week before reviewing offers. I even remember the days we used to say 2 weeks!  But with so great a demand for housing, even one week is hard – with many Pre-Emptive offers scooping up homes.

All of this does sound like madness, but have no fear – The Caton Team has been through it – with over 40 years of combined local experience – The Caton Team is here to help!

Heres some tips on how to navigate a low appraisal:


PLAN FOR IT:  When The Caton Team sits down with our buyers to prepare an offer – we provide the data we use to guide our clients so we can discuss an offer price and terms strategy.  Sometimes we’ll find ourselves in uncharted waters – where current demand is not reflected in the data.  I.E. Pending Sales are higher than Closed Sales. If an appraiser uses the older data and that data doesn’t reflect current demand – here lies the gap between contract price and appraised value price.

So what do you do as a buyer?

Plan for the appraisal gap.  When you’re writing that non-contingent offer make sure you’re not maxing out your bank accounts. (If you are maxing out the accounts – it’s time for a pivot but that’s another conversation.) When writing that strong offer – make sure you have ‘competition reserves’ IE money to fill that apprisal gap. Because if your offer is accepted and it doesn’t appraise – the home is most likely still worth it and worth the buyer filling the gap. Why you ask?  The stats. If you’re in an inclining market – as the pending sales close and become sold data – the next home may not have an appraisal issue – and most likely the next home will be priced higher than that offer you’re worried about today. However, even situation is unique and requires care and diligence.

ASK FOR A REVIEW: When the appraisal arrives – send it to The Caton Team. We will pull up each address of the homes used in the appraisal report (usually 3) and evaluate if it is a fair comparable. If not – we will submit the challenge with you through the review process with the lender however; just know, the appraisal is often not adjusted. So it’s back to Plan A – Plan For It. When the housing market is in high demand and inclining, it usually pans out for the buyer in the long term to pay the gap today. History will show you – the value of California Real Estate, even with its dips and drops over the years – has been appreciating since 1849. However, this blog post is for general information – each client situation is unique and requires its own course of action.

GET UNDERWRITTEN FOR YOUR HOME LOAN: A buyer is only as solid as their home loan. It’s best to get fully underwritten with your lender. It’s imperative to know your budget inside and out. To understand the monthly outlay, the closing costs, reserves, and a cushion for competition and appraisals gaps. If you’re comfortable with the numbers it’s time to get serious about buying. If the numbers don’t sit right – it’s time to adjust strategy and long term goals. Be open to each adjustment.


Even with a non-contingent offer – sellers still need to be aware of the market and appraisal issues. Even if your buyer has great reserves, they’re only human and there is a finite amount of money in the bank – no matter how wealthy. 

REVIEW BUYERS PROOF OF FUNDS: When The Caton Team reviews offers with our sellers, we take the time to look into the reserves and speak to the lender to discuss these possible pitfalls and ask – point blank – how the buyer will respond to possible situations. Will the buyer agree to pay the appraisal difference? Will the buyer ask for a price adjustment to the appraised value? The Caton Team believes open and honest communication is the cornerstone of good business – so we ask these questions to our fellow agents and open the dialogue towards solutions.

BEST OFFER VS HIGHEST OFFER: When reviewing offers the highest offer doesn’t always mean it is the best offer. There is a limit to what a market can hold. So be considerate when accepting an offer and review the various terms and proof of funds. If one offer is so high there is no chance it will appraise – unless it is a cash offer – that may not be the best offer.

CONSIDER ADJUSTING THE PRICE: Sometimes, even with a non-contingent offer it would behoove a seller to adjust the offer price down to the appraised vaule. Why??? Appraisal issues do not magically disappear. If the difference is data driven, the data is pubic and doesn’t change until new sales close escrow. So two appraisals done the same week could result in the same situation. Of course this is multifaceted as well and some sellers may not need to adjust if they have new or back up offers.

BACK UP OFFERS: Sometimes, it doesn’t hurt a seller to place an offer in back up position. There are various reason why this is a good idea and why this is not necessary. It all comes down to demand. How many offers did the home receive? How many of those offers would the seller consider? Now we’re getting into the nitty gritty of Real Estate – so I’ll save that for a private consultation.

Real Estate is a meeting of the minds, not a twisting of the arm. The Caton Team believes in being kind and mindful to our clients and our fellow Realtors – together – we make Real Estate dreams come true.

This year The Caton Team has faced it all.

If you’re thinking of selling or buying Real Estate in the San Francisco Peninsula – contact The Caton Team for a private consultation. We love what we do and would love to be of service to you and your friends.

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Eight Ways To Improve Your Home Appraisal

When I read this article I had to share it.  The Caton Team always provides comparable properties for our buyers appraisal.  But when you are refinancing on your own – don’t hesitate to call us – we’ll provide comparable properties for you!  What can the Caton Team do for you?

Eight Ways To Improve Your Home Appraisal

When Kellie and Michael May decided to refinance their home in the New York suburbs, they wanted to take advantage of historically low interest rates. But before landing a new 30-year fixed-rate mortgage, they had to get through a home appraisal.

“It was a major stumbling block,” says Kellie May, who has owned the 4-bedroom, 3-bath colonial for seven years. Not that she and her husband were unprepared; they’d been through an appraisal for another refinance in 2010, so they knew to point out improvements they’d made to the 3,400 square foot home, and supply prices for other neighborhood properties that had sold recently.

But the appraisal came back roughly $70,000 less than the $1,230,000 the Mays were expecting, and too low to support their new loan.

They responded with a paperwork arsenal aimed at their lender, asserting that the appraisal had been based on faulty recent sales data. The loan squeaked through, after the bank crafted an exception for the Mays. It was able to do that because their loan was a jumbo loan, not subject to the more rigid underwriting standards they would have encountered if it were a conventional loan aimed at secondary buyers like Fannie Mae and Freddie Mac.

Low appraisals are becoming a bigger problem for many would-be buyers and refinancers as home values have started to stabilize and rise in some markets.

In Leesburg, Florida, for example, low appraisals have caused the cancellation of as many as 15 percent of home sales for local real estate broker Gus Grizzard.

“We are seeing higher price appreciation and are starting to run into appraisal problems,” said Charlie Young, chief executive officer of ERA Franchise Systems, a firm with a national network of real estate brokerage offices, including Grizzard’s. The National Association of Realtors reported on Tuesday that inventories of homes were low and the median price a home resale was, at $180,800 in December, up 11.5 percent in a year.

Appraisals are based on recent sales prices of comparable properties. And in rising price markets, those sales prices might not be high enough to support the newest deals. Young said there were many places in California reporting appraisal problems.

On Friday, the federal government issued new rules aimed at improving the appraisal process as it pertains to high-interest mortgages on rapidly appreciating homes.

But those rules don’t go into effect for a year, and don’t apply to most conventional loans. It pays to protect your own loan before the bank even thinks about sending that guy with the clipboard over to your house.

“The reality is that the appraiser is only there for 30 minutes at most,” says Brian Coester, chief executive of CoesterVMS, a nationwide appraisal management company based in Rockville, Maryland. “The best thing a homeowner can do to get the highest appraisal possible is make sure they have all the important features of the home readily available for the appraiser.”

Here are eight ways you can bolster your appraisal:


Is the appraiser from within a 10-mile radius of your property? “This is one of the first questions you should ask the appraiser,” says Ben Salem, a real estate agent with Rodeo Realty in Beverly Hills, California.

He recalled a recent case where an appraiser visited an unfamiliar property in nearby Orange County and produced an appraisal that Salem said was $150,000 off. “If the appraiser doesn’t know the area intimately, chances are the appraisal will not come back close to what a property is really worth.”

You can request that your lender send a local appraiser; if that still doesn’t happen, supply as much information as you can about the quality of your neighborhood.

PROVIDE YOUR OWN COMPARABLES – Call The Caton Team – We’d be happy to help you!

Provide your appraiser with at least three solid and well-priced comparable properties. You will save her some work, and insure that she is getting price information from homes that really are similar to yours.

Websites including Realtor.com, Zillow and Trulia offer recent sales prices and details such as the number of bedrooms and bathrooms in a home.

KNOW WHAT ADDS THE MOST VALUE – Not sure where to put your money?  Call The Caton Team – We’ll help!

If you’re going to do minor renovations, start with your kitchen and bathrooms, says G. Stacy Sirmans, a professor of real estate at Florida State University. He reviewed 150 variables that affect home values for a study sponsored by the National Association of Realtors. Wood floors, landscaping and an enclosed garage can also drive up appraisals.

DOCUMENT YOUR FIX-UPS – Keep those receipts!

If you’ve put money into the house, prove it, says Salem.

“Before-and-after photos, along with a well-defined spreadsheet of what was spent on each renovation, should persuade an appraiser to turn in a number that far exceeds what he or she first called out.”

Don’t forget to highlight all-important structural improvements to electrical systems, heating and cooling systems – which are harder to see, but can dramatically boost an appraisal. Show receipts.


If your town has recently seen exciting developments, such as upscale restaurants, museums, parks or other amenities, make sure your appraiser knows about them, says Craig Silverman, principal and chief appraiser at Silverman & Co. in Newtown, Pennsylvania.


Many homeowners covet that refinished basement, but that doesn’t mean appraisers look at it the same way. “Improvements and additions made below grade, such as a finished basement, do not add to the overall square footage of your house,” says John Walsh, president of Total Mortgage Services in New York. “So they don’t add anywhere near as much value as improvements made above grade.”

According to Remodeling magazine, a basement renovation that cost $63,000 in 2011-12 will recoup roughly 66 percent of that in added home value. That’s not as good as an attic bedroom, which will recoup 73 percent of its cost. Even similar bedrooms typically count for more if they are upstairs instead of downstairs.


Even jaded appraisers can be swayed by a good looking yard. “Tree trimming, cleaning up, a few flowers in the flower beds and paint touch up can all help the appraisal,” says Agnes Huff, a real estate investor based in Los Angeles.

That advice holds true indoors, too. “Get rid of all the clutter in your home,” says Jonathan Miller, a longtime appraiser in New York. “It makes the home appear larger.”


Don’t follow the appraiser around like a puppy. “I can’t tell you how many homeowners or listing agents follow me around in my personal space during the inspection,” he says. “It’s a major red flag there is a problem with the home.”

And while you’re at it, make the appraiser’s job as pleasant as possible by giving your home a pleasant smell. At a minimum, clean out the litter box. Baking some fresh cookies and offering him one or two probably won’t sway your appraisal, nor should it. But it couldn’t hurt.

I read this article at: http://www.reuters.com/article/2013/01/22/us-usa-housing-appraisals-idUSBRE90L0ZE20130122?VBd0T4I3F0KvenaC7w1NXQ=1

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Appraisals – The Hurdle

Finding a home these days is journey in itself.  Getting the home you want is the next headache.  In the last year we’ve seen deals fall apart at the bitter end – over the appraisal.  Realtors take this very seriously.  We do not want overly inflated appraisals that got banks and purchasers in hot water in the past.  We also do not want to see ridiculously low appraisal either – especially in markets where housing is in recovery and values are slowly increasing.  Realtors, their clients and lenders want to see realistic appraisals.
Lately – it is taking banks more than 30 days to close a deal.  Close of escrow periods are extending from the typical 30 day window to 45 days and beyond.  Some deals are falling apart when the appraisal is much too low and neither side will budge on price, or clients are forced to pay the difference if they truly want that particular home – which can be a hot mess.  The Caton Team strives to protect our clients and will guide each buyer or seller through the best course of action – and often times the best course is different for each client.
Ways to avoid this headache.
We are blessed on the San Francisco Peninsula to have a variety of job markets in the Silicon Valley and the Biotech industries. If you’re in the market to purchase a home – The Caton Team highly recommend you work with a LOCAL lender and as professional Realtors we request local appraisers as well.  Appraisal companies have changed dramatically since the boom – and for good reason.  However, when you get an appriser who generally works in Modesto (for instance) they will not have a good grasp on the peninsula market – and often the appraisal come in to low.  The “Appraisal Review” is becoming the norm these days – when the difference is too great – and adds days to the close of escrow window.
The bottom line.  Be smart.  The Caton Team always provides our buyers with a Comparative Market Analysis which is a Realtors version of an appraisal.  We take into account the activity of similar properties in similar areas in s short window of time to determine the value of the home when writing an offer – therefore offering a solid offer with a realistic price.  Recovery of our real estate market will take time – and for those of us fortunate enough to call the San Francisco Peninsula home – we know it will recover.

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Below is an article I’ve found addressing these concerns that I thought I would share with my fellow readers… enjoy.
Aced Out By an Appraisal
Published by Preston Howard

One of the most frustrating things about the new world of real estate finance is the good old fashioned appraisal.

You can have a borrower who makes more money than the amount of the loan that they are requesting with an 800 FICO score and a stellar financial profile. The file can get underwritten and the deal can be the most solid deal that a bank has seen, but no one is safe until the appraisal comes back confirming the value requested. Homeowners who have been through this painstaking process know what I’m talking about. Realtors walk around in doldrums of disgust as their brokerage commissions go up in smoke. Fellow mortgage brokers bury their heads in shame and pain as deal after deal dies at the hands of an appraiser. However, the unfortunate thing is that there appears to be no end in sight.

The reality is that there were many appraisers out there who severely inflated our housing bubble by doling out overly generous values. However, the appraisal flu has spread throughout the ranks of entire armed forces of the appraisal brigade. By and large, conservative appraisers are coming in lower than ever, while aggressive appraisers have become more conservative. Lots of appraisers have quit the business entirely, while others have become property inspectors! Why is this?

Part of the pressure is coming from banks that want more conservative valuations due to enhanced regulatory scrutiny. Other forces at play include an overly abundant inventory of distressed properties. In the past, appraisers made adjustments for distressed sales; but in many markets, this is no longer the case. Given that so many appraisers are no longer making adjustments for distress, valuations are coming in 15-20%. Both instances have stalled the recovery of the housing market. Inexperienced appraisers from 50 miles away are being utilized to value properties in niche, pocket, and specialized markets. Accordingly, market knowledge is overlooked and expertise is left out of the equation. The scant facts are coming in and the effects are damaging. National realtor boards approximate that ten percent of escrows have been killed due to a low valuation. Another twelve percent of transactions are stalled in limbo, while a final eighteen percent have had to return to the negotiating table for a price change.

So, what are we to do? This calamity started when New York governor Mario Cuomo fought hard for the installment of the Home Valuation Code of Conduct (HVCC). Since its inception, mayhem has been unleashed across the real estate industry. What was meant to “protect the consumer” has essentially harmed the consumer, paralyzed our industry at a micro level and the economy at a macro level. Real estate professionals have been mobilizing, and the results have been mediocre at best. With the advent of the Dodd-Frank Financial Reform Bill, the HVCC has seen its “sunset”; however, the low appraisals continue to persist. The one thing that is now allowed is that anyone “with a beneficial interest” in the transaction can contact the appraiser and provide comparable sales to substantiate values. While this sounds promising, many lenders still heed to the rules of HVCC and will not allow brokers or borrowers to contact the appraiser. (Talk about not following the rules). Thankfully, some consumers are taking matters into their own hands. I have encountered homeowners who just so happened to be writers and have profiled the issue in front-page articles in the Los Angeles Time while others have been able to get their woes heralded in The Wall Street Journal. Constituents across the county are lobbying members of Congress and the Senate to draft legislation to change the HVCC. However, I don’t believe that anything major will be done until those in power are denied a loan.

Much like there were the “Friends of Angelo” who got preferential treatment with refinancing with Countrywide (many of which included various Federal lawmakers), the same will most like have to apply in the appraisal industry. When Congressmen, judges, and commissioners start to receive declination letters en masse due to low appraisals, then we will see a shift in the pendulum. I haven’t heard of Ben Bernanke getting a low appraisal on his home or President Obama. However, I do believe that if Max Baucus (Chair of the Senate Finance Committee) gets a low-ball appraisal, then the issue will get traction. If the “Gang of Six” all get forced to the negotiating table due to a low valuation, I have a feeling that our deficit will take a back seat to Senator Coburn and Senator Conrad’s desire to lock in a rate that hasn’t been this low since both gentlemen were in elementary school.

In summary, we are all tired of watching deals go up in smoke over conservative appraisals. It’s a shame to not go forward on a deal with good credit, strong cash flow, and clean collateral when you don’t know if you are at 75% or 85% LTV. Collectively, we need to advocate change and encourage local and national champions to spearhead the issue. Money is being spent, deals are being lost, and tempers are flaring. Enhanced legislation and examination are needed to stop the run away train of low valuation. Therefore, call your member of Congress and express your frustration. If you have access to media, spread the word. Our equity depends on it and ultimately, so does our economy.

Preston Howard is a mortgage broker and Principal of Rose City Realty, Inc. in Pasadena, CA. Specializing in various facets of real estate finance.

Republished from Broker Agent Social Network Newsletter. Aug 2011.