If you look long enough on the web, you will find someone, somewhere to support your reasoning. I always thought appraisals were in the mix so this artilce supports my view. The internet is truly magic! And I even found a graphic! Overvalued Homes Causing Problems for Sellers in Down Market. The Article says:
“As the South Florida housing market remains cool, Americans are confronting a problem that was easy to ignore during the boom: inflated appraisals of home values."
"Insiders have often feared that appraisals are unrealistically high. Why would this be the case? Because appraisals help Florida home loan officers and mortgage brokers close the deal - therefore, they're not very likey to favor the buyer. After all, if a home is appraised at less than the buyer offered, the deal is likely to fall through."
"Inflated appraisals didn't matter much when home prices were rising at double-digit rates; actual market values would simply soon catch up. Now, however, prices are leveling off around the state. Some homeowners are finding that market value is below what past appraisals led them to believe.”
and
"Now it's pay-the-piper time for people, and they're finding out they don't have the value in the house they thought they had," says John Taylor, president of the National Community Reinvestment Coalition, a Washington-based nonprofit that supports low-income housing.” (By James R. Hagerty and Ruth Simon From The Wall Street Journal Online)
You might say now: "So, who cares."
I think we all ought to care. You know that stupid "trickle down" economy they always talk about. Well this is going to smack you in the face!
5 comments:
I agree with your article on appraisers. But don’t get confused between property appraisers and tax assessors. Tax Assessors did not like that name, so they got legislation passed changing their title to property appraiser. However, a lot of people confuse Property Appraisers (tax assessors) with appraisers of property.
Florida licensed appraisers (commercial or Residential) are required to follow USPAP which are legal guidelines to value property (the appraiser must follow USPAP it’s the law). The appraiser utilizes three approaches to value to value real estate: The cost approach, where the appraiser computes the cost of buying land and building a structure; the sales approach, where the appraiser will also analyzes sales of comparable property in the market, and the income approach, where the appraiser analyses the potential income stream of the property.
The tax assessor uses a mass appraisal approach which should include all the above. However, most assessors believe that the highest sale in the market constitutes the market, rather than looking at all the sales and determining an average or mean price, or the most probable price. The assessor is required to take into account the closing costs, so that the assessment is not the price paid by the buyer but the net proceeds received by the seller. This is why when a property is sold the new assessed value is usually from 10 – 15% less than the transaction. The problem with this is the assessor ignores all of the sales below the highest sale. This is what is pushing the assessments up on both residential and commercial properties. To make matters worse the property assessor is presumed correct by law. This presumption makes the challenge of lowering ones assessment at the Value Adjustment Board a bit harder, because you need to find flaws in his analysis to overcome this presumption.
When the Media talks about lowering the mil rate this ignores the other half of the problem which is to look at how the County assesses property.
If the Assessor uses the highest sales in the market to determine market value, or he determines that the “highest and best use” of property is as speculative investment for flipping, then the Property appraiser can really run up the numbers. Because he ignores the current use or is looking at speculative sales as his gauge for value, he is going to get a real run up in assessments because he is using numbers that are not reflective of a stabilized market.
Don’t even get me started on REIT sales that are occurring in the commercial market. These properties are being purchased in portfolio sales and REIT’S are required by the SEC to grow their investment portfolio if the want to be traded in the stock market. I see these sales being used by tax assessors all the time, and the assessor ignores business value, assemblages, and arms length deals where one LLC sells to another but yet they are the same players and often promised a chair on the Board of directors. These sales should be thrown out completely, but instead they are being used to justify higher and higher assessments. Of course, local governments get a windfall in revenues if they do not correspondingly reduce mil rates.
AL
thanks AL you cleared up a lot!
When I refinanced the house, I actually had to warn the mortgage broker and his appraiser, not to inflate the value of the house... they were pushing to get me more cash out... I told them I didn't want higher payments... but within in months I found that they had indeed kept my house payments level by accidentally forgetting to escrow my windstorm... They showed it on the closing statement, but someway, it wasn't included in the monthly payment until I got nuts... then my house payments really did jet up.
Anyhow, that isn't the theme of this post, but there has to be quite a few people shocked when their house is put on the market for less than what the appraisal showed. Scary and Depressing.
There are some municipalities where the city manager staff, like Coral Gables, repeatably bug the Miami Dade County Property Appraisals office with calls to push up assessments on individual properties. Well this might be great if you are flipping or cashing out, but if you own a small residential building for something like 30 years full of little old spinster women you have to sell. Add the insurance to the taxes and it is impossible to hold onto a well-maintained residential building. While this may be great for the city, developers, county budget (at least in the short-term) and even the property owner (if they sell) but it is very bad for affordable housing, the community, and especially the little old ladies. Unfortunately it is a tale that is told again and again all over the county. And on this blog you thought all you had to deal with were business lobbyist what about avaricious executive municipal staff?
Informative posts, thanks.
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