Home Values Are Up, Now What?
It is no secret that residential real estate is up in value. It’s not only people fleeing the city for the suburbs, home values have increased across the nation. In fact, February marked the first time since 2013 that home values have risen in double digits at 10%. That statistic is on a national level through a 12-month period. What are some takeaways with the current real estate climate?
It’s a seller’s market
The state of residential real estate is in a frenzy. It is most definitely a seller’s market. The inventory is quite low and the demand is extremely high. This means many homes that are listed are going into bidding wars and selling way over list price – what can you do about this? If you are buyer, cash offers are king. Be aware however, if you are going to bid way over the list price, which people do, the appraisal may not support that value if you are financing. Appraisals are based on the historical data of closed sales. They can also include some under contract and active listings to help support it. When the market is moving so fast, it can be difficult to support an outrageous contract price.
Some buyers or realtors are now hip to the increasing market and are listing high to push the boundaries to see what they can get for that property. Don’t fall for this trap. If a home is sitting in this market, it is simply listed too high. You can obtain an appraisal before you purchase to determine the fair market value.
Seek exclusive listings
Find out about exclusive listings from real estate agents. As an appraiser, I wasn’t sure why a seller would want to go the route of listing a home exclusively and reducing the amount of exposure to the market. I asked a reputable local realtor this question. Her answer was enlightening. She was a realtor at the largest and most known realty office in the area. She explained that the benefits of an exclusive listing is that you are only dealing with local realtors in the office and their clients. The realtors in this office know the rules and how to play the game. You are not dealing with potential realtors outside the area that may cause delays or other problems down the road. The probability of a smooth transaction is greater. Some sellers also do not want a ton of traffic through their house when selling or pictures of their home on the MLS. This limits the amount of people walking through the home and people seeing the interior.
If the appraiser can obtain info from the exclusive listing, an appraisal can be completed to determine the fair market value. It can help justify and make an accurate offer.
PMI removal in an increasing market
If you purchased a home in the past few years and did not put enough down to avoid PMI (Private Mortgage Insurance), now is a great time to try and remove PMI. Typically, a homeowner needs to put down 20% when purchasing a home to avoid PMI. In order to reduce the risk, the bank wants the owner to have 20% equity in the home. If you only put down 10% during the purchase and it was one year ago or more, you may be in luck. With the market appreciating 10% (on a national level), a new appraisal may show that you now have 20% equity in the home. Once you submit the appraisal to the bank showing that, they will remove the PMI and eliminate that additional monthly payment – potentially saving hundreds of dollars each month.
Tax appeals
Lowering your taxes through a tax appeal is solely based on market value. In order to be eligible, the appraiser has to value the home 15% lower than the town’s assessment. Unfortunately, with the market being up so much, the odds of a successful tax appeal this year are much lower than normal years due to the rising home values. However, I still found a few cases there were eligible for an appeal.
Although some people want to sell their home now and sell it high, they are also going to have to buy high unless they rent. Some homeowners who have a second vacation home who are selling their main house and moving to their second home. If you find yourself in a position where determining the fair market value of a home will be beneficial, please give us a call at 908-233-1337 so we can assist you in your decision-making process.