Amendment of Post Below

I feel I must update my rather harsh post below. The appraiser in question called me, and we spoke at length. He agrees with me that the house was priced well, but he said he just couldn't find comps to support it.

We went back and forth a bit, and I dug up a comparison that was not on the mls., which he used, and lo and behold, the $4,000 gap was bridged, and all is well in real estate land.

I am still convinced that the comparison format to define value is flawed. How can a property ever appreciate if it is only compared to recent sales? It is sort of the chicken or the egg scenario, but there must be a price jump somewhere, to start the ball rolling. Does it begin with someone willing to pay cash to bridge a gap? Then once that property joins the comparison pool, the next buyer doesn't have to come up with as much cash.

And in the reverse, what we are seeing now is the foreclosures dragging down the comp. pool, and deflating value.

Who knows...What I do know is that this time it worked out, but I'm sure I will be in this predicament again. It is just very important to get all parties (broker, appraiser and lender) all on the same page, then at least there is a possibility to work it out.

Appraisal Gaps...A Rant, and Perhaps some Insight

Once again I have an appraisal gap on one of the deals I am involved in. It is a $4,000 difference. I have had a few of these before, but this is the first since the inception of my blog, so now I can rant here, instead of pacing and muttering in my office.

An appraiser is hired by the lender to determine "market value", and to ensure that the collateral is equal to the loan. However, in my opinion, the appraisal process is flawed, and very often the appraiser is clueless, for lack of a better term

The definition of "market value" is: "the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion."

Now to me that means that "market value" has been determined before the appraiser ever sets foot on the property. A competent real estate broker (i.e. myself) has already evaluated the home, set an estimated sale price, produced a willing buyer, and procured an offer. The value of the property becomes what someone is willing to pay for it.

Now some will argue that it could be a nutcase who is willing to pay much more than the home is worth, so that is where the appraiser comes in, and I agree, but when the appraisal comes in less than 2% below the asking price, are you serious? Can you really believe that the appraisal process is that specific? Of course not, it is a joke.

The first thing the appraisal company asks for is a signed copy of the contracts. So they know the price before they ever look at the house. To me that is ridiculous. If you are so confident in your ability to determine fair value, go in blind. Give me a real opinion, not one carefully crafted around a pre-determined number.

So over $4,000 the deal comes to a screeching halt--1.82% In this unstable market, some would argue that home values could change that much in a few weeks. But rigid banks, and clueless appraisers, cannot see the big picture. It is frustrating.

Now let me say that I have worked with some good appraisers, who get it. And believe me an appraiser who gets it would never turn in an appraisal this close to the price.

It reminds of the type of people who say they can only have Grey Goose in their vodka tonics, and yet in a blind taste test, you know that they will not tell the difference between that and Smirnoff. Self importance to me is one of the most distasteful characteristics, and an appraisal, at 1.82% below ask, screams of self importance.

All right, I feel a little better...

The Land Crave

As a reluctant salesman I try to consider my self more of a novice therapist. As a matter of fact, I always considered the term salesman to be somewhat derogatory and the occupation rather derisive. It evokes images of door to door encyclopedia peddlers with felt hats and slumped shoulders. Or even worse fast talking car dealers, teetering on the edge of morality.

I have met the hard sell real estate salesman, and frankly I can't stand those types. If you had to come up with a list of noble professions, I'm sure you would pick doctor, teacher, foster home worker, caregiver, etc. Real estate agent would be pretty far down on the list. And rightly so. There are much more noble professions than mine, but every once in a while I feel like I am really helping someone fulfill a dream.

This has happened a few times with land buyers. I was out with a couple last week. He is looking for land, at least twenty acres, and the only real requirement for him for the house is that it has a roof and four walls. She is a little bit more picky on the house, but not much.

Getting him out in the woods was like taking a kid to Disneyland. Owning space to roam. I think for some it is a primal need. I showed him four properties, and he loved every one.

I have had three or four such buyers over my real estate career. They are a joy to work with, not because they are easy buyers, some can be hesitant, but because there is a certain lack of suspicion and a real genuineness. They are acting on a dream.

Invariably it seems to come from a childhood memory. Everyone, when telling me what they are looking for, has a control, whether it be a big parcel that their grandparents owned that they used to roam as kids, or a summer camp they would attend. There was something that fostered this dream to own land.

But just watching this man this weekend, I realized that he has thought and planned and worked hard for this. This is his dream, and I am helping him achieve it. Noble? Not open heart surgery with a ball point pen noble, but it gives me a feeling of satisfaction that I think we all need.

Foreclosures

As the media continues to spell doom to the entire housing market, I am getting more calls from second home buyers looking for foreclosures. Invariably even if the prospective buyer doesn't begin with that topic, as we chat about what they are looking for, the subject always comes up.

It seems that some have this vision of finding the deal of a lifetime, and snatching up a wonderful little country getaway for a fraction of the cost.

Its like the urban myth of the "friend" who is subletting their grandmothers duplex in Chelsea, and paying only $600 a month. When I lived in Manhattan, everyone sort of knew somebody like that, but not really firsthand but they were spoken about with awe and reverence, and a bit of jealousy.

The problem with the foreclosure market in Sullivan County, is that that side of the housing market is very different than what most of the people I deal with are looking for. I attached a link to a typical foreclosed property here. Believe me this type of house is a dime a dozen.

Click Here

Most are in the south eastern part of the county, around Monticello, Fallsburgh area. Like the rest of the country, they are mostly primary homes, taken over by the bank after the owners have stopped paying. The houses are often in disrepair, and have been on the market at various prices throughout the foreclosure process. Contrary to what some might think, a home typically goes into foreclosure only when every other avenue has been tried. Banks do not like to lose money, and will not give a house away.

Now I am sure that there are some very nice second home style properties out there right now, where the owner is in a tough financial situation, but being upside down, or even attempting a short sale, does not automatically turn a deal into a steal.

I just heard of a house that is going to auction this week. It had been on the market for almost two years, the price dropping to 70% less than what was originally asked. The problem is that it is in a flood plain, with major water damage, and even at these low prices, buyers do not want to deal with that headache. I am curious to see what it sells for, but like anything else in life, if it sounds to good to be true, it probably is.

Froelich Road Houses

I posted last month about the three houses on the hill above Callicoon. Well the lower house finally closed last week. Price was $250,00o. Originally listed at $399,000--it is a nice house with some good views. I attached the picture below. The only downside is the driveway, which is quite steep. But I suppose at that price it still becomes worth it.

The upper house, however just came back as active on the mls. I am not sure why the deal fell through, but after sitting with signed contracts for almost two months, something happened to kill the deal.

I attached pictures below. This property has the driveway to contend with as well. But it is a nice big house, and the views are the best of any house on the market in the county. Hands down. It is listed at $329,000. Originally it was close to six..

I really believe that this house is one of the best deals on the market right now in this county. Any offer in the mid to high two's would probably get accepted. ( I do not know for sure, as I am not the listing agent.) But browse some listings in that price range. They don't even begin to compare.

Now couple that with a very low interest rate. Is this Apple stock pre ipod/iphone? Not quite, but three years from now, this house will not be worth less than $260,000. And interest rates will be higher.

If anyone is interested in viewing this home give me a shout.

The Gaffken-Barriger fund wins first round

Interesting article in the River Reporter about the latest on Barriger. The link is below.

For those of you who aren't familiar with Gaffken-Barriger, they are a private investment company here in Sullivan County, that specialized in higher risk loans, with a high interest rate.

Well, when the market began to tank, numerous mortgagers defaulted, including a Florida based company, which had borrowed over ten million.

Those who had invested in the fund are insisting that they were "guaranteed" an eight percent return, and are quite upset, that not only are they not getting a return, the principle is gone as well. An investigation continues, but no criminal charges have been filed, and from what I hear, they are not expected.

It is rather sad. I met with an older couple last month, who must sell their house and move in with their daughter because they invested their life savings with the fund.

But I suppose this is a prime example of caveat emptor. With all the fast talking that I'm sure went on to convince people to invest, there must have been some fine print somewhere that this was a possibility. This was no Ponzi scheme, although I'm sure that is little solace for those who have lost their shirts.

http://www.riverreporter.com/issues/09-04-02/head2-invest.html

Interesting Listing

Once again my blogging has lagged. And once again it is because I'm busy. This past weekend I was out showing both days. Buyers are returning, as the air is warmer, and the prices and interest rates are lower.

The market has definitely changed, and I think for the better. I remember the days when I used to cringe when I would get calls for prospective buyers looking in the 150 to 200 range, and anything lower was really crap. I remember early last spring (march '08) I showed fifteen houses to a guy in that mid $150,000's range all around the county. He wasn't looking for anything extravagant. I believe it was three bedrooms, two bath with a little charm and privacy. Some of the things we looked at were absurd. It got to the point where showing was no longer any fun, and at times it felt like a real waste of time.

I believe the people who drive the real estate market in this county, are a gen x subdued version of the yuppie. (although if you call them that, they would be somewhat indignant) At any rate, our county is very dependant on that particular city-folk weekender. Not ultra-rich, but rather one where a second home is a big purchase, and one in which serious sacrifices must be made to make that dream a reality.

Those folks began to get priced out of the market, and that is when our version of the real estate bubble burst.

But now those people are able to look again, and see things in their price range that they like. The reason this all came about is because I was speaking to a customer about a particular property he likes.

This property is in Cochecton. It is a 1900 farmhouse on 28 acres, with the original barn, and all the original floors and walls. (The dreaded 70's paneling did not manage to infestate this one.) It has its normal farmhouse drawbacks, one bath, funny shaped kitchen, a lot of paint and elbow grease will be needed. I attached a few pics below, courtesy of Malek.

Current price is $248,000. This is one of those properties with good bones--actually great bones. The acreage does have the millennium pipeline cutting through a portion, but it is somewhat flat and has a big stream.

If you take this property, and refinish the farmhouse to its glory, and do it slowly as a project while you come up on weekends, what will this property be worth in lets say ten years, if the market rebounds.

I know at the height of the boom, a redone property like this was selling for mid sixes. You couple this with a low 4.5% interest rate, and all of the sudden it makes sense to buy it, not only as a labor of love, but as an investment. The naysayers will moan about how we are not at the bottom, and it is much to risky, but they also would have told you not to buy stock when the market was at 6,700, almost 1,000 points ago.

And in ten years when the interest rate is 8.6 and our median price here is up 48%, we may look back and say. Shoulda bought at the bottom.

Its gonna be fun to read some of the e-mails I get on this one...

My New Listing

First off the house I wrote about in my previous post sold for $450,000. Not bad I was guessing less. I am sure the new owners are going to love it. It really is a special property.

I think in this down market, where every buyer seems fixated on value, and finding that elusive bargain we have lost sight a little bit on why people buy second homes in this county. I think this concept has been touched on in other blogs, but at the risk of sounding like the department of the redundancy department, I would like to put my own spin on it.

People buy here for a lifestyle--a getaway--for rest and peace of mind. That is why the real estate department varies so tremendously here. A suburban ranch in Monticello will be priced very differently than a small quaint farmhouse on a quiet road, although both may have similar square footage, and be only a few miles from each other.

With that being said, I have a new listing in Black Forest Colony, which is a private preserve/development in Lumberland. There is over 1,100 acres set aside for the residents to use--hike, hunt fish atv, whatever. This particular property is five acres with a great year round stream, a private wooden bridge is the only way to get to it. It is deep in the woods. The house itself is more of a cabin. I attached pictures below. It was built in the fifties, and as a lot of charm. All original woodwork, etc.

You can see more pictures on my website. Now you may think I am pumping this property because it is my listing, and that is true, but I think it also brings up an important issue on value. We decided to list this property at $245,000. It has less than 1,000 square feet. Some will probably look at this listing at shake their heads, and murmur something about overpriced in a market such as this.

But there is no other listing in Sullivan County that is similar. It has what very few properties have. Complete seclusion, access to land for recreation, and some real authenticity.

In my opinion it is a simple case of supply and demand. That is why we decided to price it the way we did. Special properties will carry inherit value despite fluctuations in the market, because the appeal will always be there.

At rate shoot me an e-mail if you agree, or if you think I am way off base.

Another 400K Plus House in Contract

Another favorite house of mine just went into "contract signed" status on the MLS. This house

is an Alpine log home on ten acres in Lumberland. I attached some pictures below.

It has three bedrooms two baths, a beautiful field stone fireplace, it is made with 18' logs. Completely secluded on ten acres, which adjoins state land.

This house has that rare feeling, where you just want to take a deep breath and relax when you step out onto the deck. The view of high point New Jersey is really nice, (in fact you can see three states from the deck)

The seller bought this house in early 2006 for $625,000. About a year and a half later, he put it back on the market. (I believe it was because of a job relocation) Initially it was put back on for $759,000. And why not? it was the height of the boom, and this really is a special property.

Well the property sat. Perhaps the cool off had finally started, and buyers just felt it was too much. Or maybe it was into that upper bracket where there is fewer buyers. At any rate, despite numerous showings, it sat.

There was a series of price drops, and a switch of listing agencies. The last list price was $499,000, and it sat at that price throughout the winter. I showed it a few times, and had an interested party, but they felt the market was too unstable, and decided to play the wait and see game.

But then Friday it went into contract signed. A quick e-mail to the listing agent indicated that it is all but a done deal, money is transferred, and it will close in a few days. I am very curious to see what the final price was. I am guessing low fours, but would not be surprised if it is in the three's. I will be sure to post when I know.

This is a situation where the current seller bought with cash back in '06 so he didn't have to worry about being "upside down". He took the 100k plus loss.

I believe that as reality sets in, we will see more and more of these type of deals. Real estate is still moving, but we are still searching--not so much for a bottom but a range--a place where we can gauge market value.

At least it is better than a dead standstill.

Interesting Article on Gas Drilling

Steve McConnel wrote an interesting article on gas drilling in Wayne County. I included the link below.

I think the most interesting thing (besides the obvious lack of permits coming in) is the fact that Stone Energy Corp. spends well over a million dollars in leases, brings in all the equipment and man power to drill, yet fails to apply for a permit from the DRBC to drill. I would love to have heard the conversation with the guilty party when the head honchos at that company found out that the drilling had been stopped. That's a pretty big oops.

I guess we will wait and see what happens. Has the bad economy and cheaper gas prices really squelched the Sullivan County natural gas rush? I for one hope so.


http://www.wayneindependent.com/news/x1959833495/Permitting-agencies-not-flooded-with-gas-well-requests