Birmingham Appraisal Blog » Appraiser

So, How IS The Birmingham, Alabama Real Estate Market??

Tom Horn — Mon, 30 Apr 2012 13:44:20 +0000

Funny you ask. I get asked this question a lot and I have my own thoughts, but it’s nice to know that other professionals agree. In addition to experiencing the local Birmingham market from a first hand experience, I read a lot of market data to assist me in my real estate appraisal business.

Local real estate analyst Tom Brander, who helps contribute data to the Alabama Center For Real Estate (ACRE), recently compiled data on what other experts think. Their findings?- you can read the entire article at the above link on Tom’s blog, but I will summarize what the community of real estate professionals feel the summer months will bring. They are confident that the market will improve and sales will be better than last year. The actual performance in the first quarter of this year, no doubt has contributed to the rosy outlook. On a negative note however prices are not expected to improve anytime soon, and the availability of credit does not look good.

I always say you have to take the good news with the bad and find the positive in anything we go through. It took a long time for us to get in the mess we are in, and it will probably take a while to get out of it, but I believe there are positive signs that show we are moving in the right direction. This is not to say that we won’t get sucker punched by the release of a new wave of foreclosures that was recently reported, but we’ll just have to cross that bridge when we get to it, right? What do you think of the local real estate market? Leave me a message below, I would like to hear your thoughts.

If you have any real estate appraisal related questions you can call me at 205.243.9304, email me, or connect with me on Facebook., Twitter, or Youtube.

An interesting trend in the Birmingham, Alabama real estate market

Tom Horn — Tue, 14 Feb 2012 00:32:34 +0000

I have noticed an interesting trend in the Birmingham, Alabama real estate market. The trend involves the segmentation of the market in various areas, but mainly where foreclosure activity is prevalent. I noticed it most recently in the Centerpoint area of Birmingham. The segments include the following:

foreclosures
“normal sales” and
flip properties

The “normal” sales are being negatively affected in an interesting way, and I will tell you how. There is a larger than typical (I guess that’s relative in today’s market) percentage of foreclosure homes that have sold over the past 12 months. Over the last several years the Birmingham market has consistently had 30-40% of sales be foreclosures or short sales. From February 2011 to February 2012 the Centerpoint market has had approximately 70% of the homes that sold be either foreclosures or short sales. That is an astonishing number, but one that indicates it is ripe for the picking by investors who want to buy, renovate, and flip the property for a profit. It appears that is exactly what they are doing.

Many of the flip properties are being listed and sold for below the market, so they will move quickly. That is where the problem for the “normal” properties comes in. They have to compete with true foreclosures that are being sold by the banks at rock bottom prices and also the flip properties that have been renovated and priced higher, but still not as high as what a “normal” property might be listed at. A homeowner wanting to sell their house will have a hard time competing with this. It seems like the forces of the market will require sellers to price their homes below the flip properties (since they are usually not in as good of condition, unless they have also been renovated recently), which will drive property values down. This phenomenon will probably begin to reverse whenever the percentage of foreclosures have been reduced, but we really don’t know when that will occur since there could be more shadow inventory waiting to come onto the market. Have you seen anything like this in your area? What has been the outcome? Let me here your story by leaving a comment below.

If you have any real estate appraisal related questions you can call me at 205.243.9304, email me, or connect with me on Facebook., Twitter, or Youtube.

10 reasons NOT to get a pre-listing appraisal

Tom Horn — Thu, 09 Feb 2012 01:48:33 +0000

1. It costs too much money- Really? If you think about the fact that by pricing the home correctly you could cut the marketing time down and reduce marketing costs, this becomes a no brainer. In addition, the modest cost would probably not exceed future price reductions that you may need because it was priced too high to begin with.

2. I want to test the market first- Some people think that they can “test” the market to see if the their estimate of value will be accepted but this could lead to longer marketing time and multiple price reductions.

3. My Realtor can come up with a list price- This is true, and there are many good Realtors that know the market, however when your home is in a an area where sales activity has been minimal, or the agent is not familiar with the market, then an appraisal can give you a more educated estimate of value that reflects current market activity.

4. I can use the tax assessed value to price my home- Assessment values set by the county that you live in are not arrived at with the same methods as an independent appraiser would use. They are done on a larger scale and do not take into consideration special features of your home. They may even be excluding newly finished areas such as basements.

5. I can give potential buyers the square footage that the county has- Buyers like to know how big a house is so that they can determine if their furniture will fit in the house. An appraisal will give accurate square footage (and a floor plans sketch) so that you can let them know exactly how big the house is.

6. I can price it for the same amount that my neighbor did who sold his home recently- I ran into a homeowner who tried this recently. What he didn’t know was that the neighbor told him the wrong price. His home actually sold for less than what he said. My client tried for months but could not sell his home because it was overpriced. He got an appraisal and we found out the home sold for a lesser amount. After my client readjusted his price, the home sold quickly.

7. I never had to do this before, why do I need to now?- We live in an unprecedented time. Who ever thought that real estate values would go down? There are more foreclosures on the market now that WILL be competing with your home. They are in better shape than they use to be and are being considered by potential buyers. An appraisal will consider both normal and foreclosures to arrive at a more accurate value estimate. If these are not considered then you could over price your home which will result in a longer marketing time and more future price reductions.

8. I know how much money I’ve put into my house, I can go by that- Cost has never equated to market value, and even more so in today’s market. While construction and renovation costs have increased, property values in many areas have decreased. Because of this you cannot assume that all of the money you invest in your home will be returned when you go to sell. Again, a pre-listing appraisal will give you a realistic estimate of what you can expect to get for your home in today’s market considering its current condition.

9. I can list it for an amount similar to what my insurance company has it insured for- For reasons similar to #8, insurance value does not equal market value. The insurance company insures your home for an amount that would be required to rebuild the home. This does not factor in depreciation and general market forces.

10. I’ll use the value that the appraiser came up with last year when I refinanced- With today’s ever changing market even an appraisal done last year can be invalid. Markets are changing daily and if you use an appraisal from last year the value may be inflated in this years market, which can result in longer days on market, price reductions and other items I’ve already mentioned. If it is in an area that is starting to rebound then the value could be too low. An appraisal done today is more accurate than a year ago.

As you can see, there are many reason not to get a pre-listing appraisal, but they all lead to the same results: incorrectly pricing your home for sale so that it takes longer, costs more, and results in unnecessary price reductions. By making a modest investment upfront you can increase your chances of a successful sale experience.

If you have any real estate appraisal related questions you can call me at 205.243.9304, email me, or connect with me on Facebook., Twitter, or Youtube.

How Shelby County, AL homeowners can find useful property information online

Tom Horn — Mon, 06 Feb 2012 14:46:32 +0000

I would like to share with homeowners in Shelby County, Alabama how they can find useful property information online. Have you ever wanted to find out exactly how big your lot is? Ever wondered where your house sits on your lot? How about finding out what school system the house you want to buy is in? These are all questions you can find the answers to by going to the Shelby County, Alabama website here- www.shelbyal.com. Take a look at the video below and see what type of information you can get.

Were you able to find any useful information? Do you know of any other websites where homeowners can get helpful information for free?

If you have any real estate appraisal related questions you can call me at 205.243.9304, email me, or connect with me on Facebook., Twitter, or Youtube.

Market Value: The X-Factor in Most Real Estate Transactions

Tom Horn — Wed, 16 Nov 2011 15:07:28 +0000

Most people have a good idea of what market value is. A short and abbreviated definition of Market Value is as follows:

Market value is the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus.

A common thread I have seen in many failed real estate transactions is the failure to start with market value and work backwards. I will give you two examples and explain to you how most people approach them contrasted with how I, as an appraiser, believe they should be approached. Many people are familiar with the process of buying a house and flipping it for a profit. Many times this is done successfully, other times not so much. Some investors do this successfully while others fail because of their flawed understanding of cost and value.

Some investors begin by looking at what they paid for the property then add the cost of improvements to arrive at a list price for the property. The problem with this scenario is that cost does not always equal value, meaning that just because you paid $50,000 for a property, invest $25,000, and require a 15% profit, does not mean that you can ask and get $86,000. The market may not support that value for the house in the current economic climate. A better way to approach this is by determining what sales price the market will support and working backwards from this number. This will help you determine how much you should pay for a property and how much in improvements you should invest, as well as covering your desired profit. I have seen many investors attempt to do it the first way I described and resort to dropping the asking price because the market will not support their original price. The bottom line is that the price is lowered, which reduces the profit from the investment.

The second scenario involves homeowners attempting to sell their home. Many owners arrive at a list price by looking at what they owe on the house and then adding in the cost of improvements they have made over the years. While this may sound like the logical thing to do the price may not be supported by the market. Some homeowners may have put too much money into their home, either by over paying for home improvements or by over improving the home for the neighborhood. It is always a good idea to find out if the value added is more than the cost of the improvements. It would not make sense to invest $25,000 in a swimming pool if the market (ie potential buyers) will only pay an extra $15,000 for that amenity. I use the pool as an example because that is one of the most common improvements that does not give you a good return on your investment. Have you experienced what I have described here? What was your outcome? I would be interested in hearing your story.

If you have any real estate appraisal related questions you can call me at 205.243.9304, email me, or connect with me on facebook.

Could Alabama Appraisers Be In Violation Of State Law?

Tom Horn — Thu, 13 Oct 2011 16:06:37 +0000

Do you do work for Appraisal Management Companies (AMC’s)? If you do and they are not registered with the Alabama Real Estate Appraisers Board, you could be subject to discipline. As of October 1, 2011 any AMC’s doing business in Alabama must register with the state. Pursuant to §34-27A-20(a)(9) of the Alabama Real Estate Appraisers Act appraisers must not accept assignments from an unregistered AMC. It’s easy to check if they are registered, just go to the state’s website.

AMC’s are companies that manage the appraisal process by working with lenders and appraisers. Lenders typically hire the management company to do the appraisal ordering and quality control aspect of the loan process. This supposedly puts a layer of protection between the loan officer and the appraiser. This became an issue recently with the collapse of the real estate market and the accusation by some that lenders and appraisers were working in collusion to make real estate deals work. Some lenders would find appraisers that would give the values they needed to close a loan. Businesses recognized this as an opportunity to provide a service to the real estate industry. Up until the passing of this law in Alabama and other states, the AMC business had little regulation. This law seeks to help regulate the industry and make AMC’s more accountable for their role in the process.

So before you do any work for an AMC, please check out their status with the state so that you avoid being disciplined.

If you have any real estate appraisal related questions you can call me at 205.243.9304, email me, or connect with me on facebook.

The Media Is Now Confirming What Appraisers Have Been Reporting All Along

A Man’s Home Is His Castle, Right?

Tom Horn — Mon, 11 Apr 2011 12:22:03 +0000

We’ve all heard the old saying that a man’s home is his castle, right? This was exactly what I thought of when I saw this house in Shelby County, Alabama.

It got me to thinking about personal taste and how that may translate into how others may feel about architectural styles that are atypical. Do you think that this style of home would appeal to others? While not a hard and fast rule, past experience has taught me that homes like this take longer to sell. Have you had any experience in buying, selling, or appraising a home with a unique style? I would be interested to hear your story.

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Are You Secretly Under Surveillance?

Tom Horn — Thu, 13 Jan 2011 14:06:01 +0000

Have you recently moved into your dream home in a great neighborhood, only to find out that you are secretly under surveillance? Have you looked out your windows to see someone taking pictures of your home? Do they speed off when they see you so they can’t be caught? You may consider it a fluke if this only happened once, but it has happened several times. Why are you being spied on?

I’ll tell you why. Because you recently bought your home, and that person taking pictures of your house is probably a real estate appraiser. They are taking pictures of your house to use as a “comp” in another appraisal report. Is it all becoming clearer now? Good, no need to contact the authorities. In case you’re not familiar with how the appraisal process works (or if you are and just forgot) appraisals are based on what other comparable properties have sold for. We find other similar homes that have sold and use them in our reports, including pictures.

I have had my fair share of experiences while taking pictures, including being pulled over by a police officer and being chased down by a homeowner in their car. If you are a homeowner have you had an experience like this? If you are an appraiser have you been “pursued” for taking pictures of peoples houses? I would like to hear from both sides because I know there are some funny stories out there.

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Birmingham Alabama Appraiser : Hoover Alabama-Greystone Market Trends-2010 Update

Tom Horn — Thu, 06 Jan 2011 15:56:21 +0000

I recently did some market research in the Greystone development of Hoover, Alabama for an appraisal assignment I am working on. This development is one of the more popular subdivisions in the Hoover, Alabama market. The neighborhood surrounds a championship golf course that has hosted The Seniors Tour in the past. Although the Greystone development is one of the premier neighborhoods, it has also been effected by the overall slow real estate market.

The price range I was working in was between $500,000 to $1,500,000. Over the past several years homes over $500,000 have had a hard time selling, as I have reported previously and can be read here. I have found numerous foreclosure sales in this price range, not unlike homes in the lower price ranges. I have included a chart of sales of homes over $500,000 that have sold from 2005 to present. If you look close enough you can see a trend of fewer homes selling over this time period. There have been homes in the upper price ranges sell, however they have become less numerous.

In addition to the above graph, which gives raw sales data, I have included neighborhood data from the past 12 months. This data analyzes sales, current active listings, months of inventory, and median sale price to median list price ratios among other things. Here is information from the 1004MC (Market Conditions) form:

What this data tells us is that the number of sales and the absorption rate (total sales/months) is relatively stable (minor variances noted). The months of inventory, or how many months it would take to sell all of the homes, is declining. This is good because it indicates homes are selling faster than new ones can be listed. The median sales price over the entire 12 month period is relatively stable (again, taking into consideration minor variations from the first period to the last), and the days on market is declining. A decline in the days on market reflects positively on sales activity. If people are not buying then a house will stay on the market longer.

Information regarding active listings and their days on market also show that list prices are holding steady, however the listing days on market is declining. An interesting figure is the sale price to list price ratio. In the first and last period it was 80%, and the middle period it was 102%. This indicates that, as a whole, the median sale price of sold homes is approximately 80% of what they were listed for. In other words they were priced too high to start off and then the list price was dropped to meet the market demand (which has been effected by foreclosure sales) . The bottom line is that a large number of recent foreclosure homes have sold which has decreased the median sale price. These foreclosures are the comparables appraisers have to use in their assignments and that have caused the value of other homes to decrease. Their use is necessary because they make up a large percentage of all of the closed sales, and are therefore influencing the market.

If you have any questions that I can answer for you please give me a call at 205.243.9304, send me an email, or connect with me on facebook.

Birmingham Alabama MLS Adds Square Foot Option to Listings

Tom Horn — Thu, 29 Jul 2010 18:48:56 +0000

The Birmingham Alabama MLS (Multiple Listing Service) has recently added an option for Realtors to list GLA (gross living area) for their listings. The new feature will go live on August 2, 2010. Realtors are given an option of entering GLA data obtained from an appraiser, building plans, or tax records.

The first two sources are reliable, however tax records can be tricky in our area. I have found that tax records are most accurate with one level homes that are either on a slab, crawlspace, or that may have some unfinished basement. It is less accurate with homes that have a second story and/or finished area in the basement. These areas are difficult to determine without going into the home. To complicate matters, the county is not notified of some improvements, making their records potentially inaccurate.

If a previous appraisal or plans are not available I suggest the realtor obtain the services of a qualified appraiser to measure their listing so they can present the most accurate information possible. There are standards for measuring homes that have guidelines for what is counted as livable space and what is not. The appraiser you choose should be familiar with these. I offer this service to all Realtors in the Birmingham, Alabama area. The fee is based on the size of the home and in addition to getting the square footage information you also get a floor plan sketch with location of rooms. This sketch can be included in your listing. A more detailed drawing is available for a slightly higher fee if this is desired.

My question to all Realtors is this: would you be interested in getting accurate GLA of your home to provide to your buyers and make your listings stand out by having a sketch of the home? If you have any questions please give me a call at 205-243-9304 and I would be happy to answer them for you.