Hoboken Property Values – What if the Appraisal Comes in Low???
Categories: For Buyers, For Sellers
A Common Problem in Hoboken Real Estate Sales
Here is a situation that has been popping up recently. A Hoboken property gets listed for a certain price, let’s say $700,000 for the sake of simplicity. It’s a really nice condo in a great location with 3 big bedrooms, some wonderful features, maybe a yard or nice terrace or a view of the city. Buyer comes along, then another, finally several buyers make offers (it happens more than you realize, even today). The price goes over asking – a buyer wins the bid and $730,000 is the purchase price. The buyer plans to put down 20% and finance the balance of the purchase price. We get through attorney review with no issues and the buyer applies for his mortgage.
The bank orders an appraisal. The appraiser has very specific rules about what can be considered in determining value. The comparable sales do not support the purchase price. The appraisal comes in at only $650,000. Now what??? This if the fun part – not.
- The buyer and seller could re-negotiate the purchase price. This seems like the sensible thing to do. But you must consider – is appraised value truly the same thing as market value? Some would argue it is not. Others would argue it is a very conservative measure used by the bank to limit their risk.
- The buyer typically has a clause in the sales contract called the mortgage contingency clause. It says that if after making a good faith effort the buyer cannot get a loan, the contract is void. If the property does not appraise and the buyer won’t put more money down, the loan likely won’t be made and he or she can walk away from the deal. This never makes the seller happy.
- The seller can demand that the buyer put more money down and obtain a smaller loan so the buyer remains within the bank’s loan-to-value ratio. If the buyer really wants that particular property, the buyer might agree.
In the past few months I had one deal where I was the listing agent and the property did not appraise. The buyer and seller renegotiated. (The sellers had little choice as they were in contract to buy a new home themselves and didn’t want to lose that property). This was one of those multiple-offer situations. I honestly believe that the buyer bid high knowing in the back of his head that if the appraisal came in low, he would back off his offered price. It was not a pretty scene.
I recently was involved in another deal where I was working with a buyer interested in a high-end property. Again, there were multiple offers. My buyer made a full-price offer even though we all knew that the appraisal was going to be an issue from the start. The buyer wanted the deal to be contingent on the appraisal. The seller wouldn’t hear of it. The deal fell apart. Of course, any other buyer who is interested in that property is going to have the same concern and the seller is going to be right back in the same situation. I guess there may be buyers out there who don’t care that the appraisal is low. Maybe they are paying all cash and never plan to sell or think the market will recover sufficiently before they do sell so that it won’t matter. Most buyers are going to be very nervous and have second thoughts when they are setting prices at the upper limit and then get that low appraisal.
Finally, there is the complication of short sales, foreclosures, desperate sellers and seller’s concessions. All of these cause low sales prices. Those closed sales become the comps that will be used in appraisals of similar properties. If you are buying (or selling) in a building like the SkyClub, where there have been a number of short sales, it’s difficult to support a high price with the comps. For an interesting debate on the subject of whom is to blame – the realtors who pushed for high prices during the boom, or the appraisers who now take the blame for low appraisals that keep sales prices down, you might enjoy this thread. Even with all the new regulations, the problem is not going away any time soon.
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The Weekly Wednesday Wrap Up – Hoboken Condo Sales & Activity for the Week of April 13th
Categories: Market Analysis, Weekly Wednesday Wrap Up
Hoboken Condos Sales & Activity – Week of April 13th, 2011
Almost every day someone asks me “how is the market doing“? To me, the answer if pretty clear – prices are still headed downward. 
Which is why it always amazes me to see sellers asking for what they paid for their condo back in ’06 or ’07 without having done any real renovations or other work to justify the price. Even if they were to be so lucky as to get a buyer to bite, what do you think is going to happen when the appraisal takes place? The property doesn’t appraise and the sales price gets renegotiated because the bank won’t make the loan. When that does happen, the sellers are in a bind. They’ve taken their place off the market, probably committed to buying another residence and have made plans to move on with their lives. The buyers have them over a barrel.
Here are the March 2011 Hoboken condo sales results:
Here is this week’s condo sales report:
Disclaimer: The data relating to real estate transactions on this web site comes in part from the Hudson County MLS. While some of these listings are, in fact, our listings they are not ALL our listings nor do we hold them out as such. Century 21 Listings are identified with “C21” after the address. Other listings are from the MLS and are identified with “MLS” after the address. Information is deemed reliable but not guaranteed.
- 380 active Hoboken condo units – vs. 364 last week
- 13 DABOs (Deposit Accepted By Owner i.e. under contract) vs. 13 dabos last week
- 7 sold vs. 22 sold
- 45 new listings vs. 31
- 20 price reductions vs 20
- 4 expired listings vs. 11
Studio & 1 Bedroom Hoboken Condos:
- 512 Jeff (C21) listed on Mar 22 for $380k.
- 1500 Hudson (mls) listed on Jan 14 for $399k; reduced on Feb 16 to $379k; on Mar 15 to $359k.
- 218 Willow (mls) listed on Mar 7 for #399k.
- 300 Newark (mls) listed on Oct 13 for $399k; reduced on Nov 8 to $389k; sold for $375k.
Two Bedroom Hoboken Condos:
- 323 Jackson (mls) listed on Feb 26 for $350k; reduced on Mar 30 to $335k.
- 400 9th (mls) listed on Mar 14 for $525k; reduced on Mar 25 to $510k.
- 530 Mad (mls) listed on Mar 7 for $469k.
- 635 6th St (mls) listed on Nov 8 $449k.
- 224 Bloom (mls) listed on Mar 15 for $599k
- 1331 Grand (mls) listed on Jun 15 for $479k.
- 350 7th (mls) listed on Mar 15 for $639k.
- 420 Jeff (mls) listed on Mar 15 for $419k.
- 659 1st (mls) listed on Mar 1 for $550k.
- 812 Grand (mls) listed on Jan 17 for $499k; sold for $487.5k.
- 82 Jackson (mls) listed on Nov 13 for $355k; sold for $325k.
- 1500 Hudson (mls) listed on Oct 28 for $870k; sold for $825k.
- 800 Jackson (mls) listed on Mar 22 for $573k; sold for $540k.
- 825 Wash (C21) listed on Jan 27 for $669k; reduced on Feb 18 to $650k; sold for $622.5k.
Three Bedroom and Larger Hoboken Condos:
- 81 Jeff (mls) listed on Mar 8 for $580k; reduced on Mar 14 to $549k; on Mar 31 to $529k.
- 520 Park (mls) listed on Jan 14 for $587k; reduced on Oct 12 to $558k; on Oct 27 to $530k; Jan 18 to $515k; sold for $495k.
Hoboken Condo Open Houses
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Thanks for reading and, as always, we welcome your comments!
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Problems with Hoboken Appraisals?
Categories: For Buyers, For Sellers
Appraisals & Valuations – a Hot Topic in Real Estate Sales
There was a very interesting article on the cover of this week’s real estate section of the New York Times. In brief, appraisals in New York city are often coming in too low because they are being done by appraisers from out of town who don’t know the local, urban markets and tend to undervalue properties; and there are not enough comps to substantiate the prices because there have been so few sales. This is an issue in Hoboken, too. Appraisers unfamiliar with the area may not appreciate the difference in location between Hudson Street and Jackson, or the benefits of a second bath in a two-bedroom apartment.
When an appraisal comes in too low, the buyer can always bring more money to the table – assuming they have the money. It’s ironic that when Hoboken condo prices were rapidly appreciating at the height of the market there was a similar problem. The comps couldn’t keep up with the sales prices. Now a down market has caused appraisals to again be the center of many buyer’s and seller’s attention.
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