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VOL. 43 | NO. 27 | Friday, July 5, 2019

Appraisers struggle to find comps for inflated deals

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It had to happen at some point. Prices in the Nashville residential real estate market have been flying skyward for seven years, and the appraisers have been able to keep pace, at times making upward adjustments when there were multiple offers on the same house.

Now, it appears, “They are plumb give out,” as one agent described the appraisal situation last week.

From near and far come cries from listing agents and sellers that appraisers are unable to find comparable sales that, even with adjustments, can validate the sale prices. When the property does not appraise for the sales price or more, problems arise.

In the past, appraisers were unfairly criticized by some for their work. Unfortunately for the real estate community, some of those people worked in a large, domed, white building in Washington, D.C.

Appraisers work to achieve a professional designation that is abbreviated by the letters MAI, also known as Member Appraisal Institute.

In a failed attempt to regulate the industry, Congress passed legislation that spawned appraisal management companies. The logic was that the banks and lenders could not contact the appraiser to arrange appraisals, rather they contacted an appraisal management company, which would then hire the appraiser.

Obtaining a license to appraise houses is a long process requiring courses, exams and, in Tennessee, a two-year apprenticeship.

While banks could not hire appraisers, the pool from which the appraisal management companies were to choose appraisers was the same group of appraisers that were already practicing.

At first, the appraisals were being delegated to the appraisers who were quick to adapt to the new guidelines and were not necessarily the best appraisers, often coming from miles away to appraise properties they had never been within 100 miles of previously.

Most contracts are written on forms provided by the Tennessee Realtors, and most brokers include the appraisal contingency when they write the contract. The contingency allows several options if the house does not appraise for the offered price.

One option is the buyer can terminate the contract, and that’s what usually happens since they often feel that they have been bamboozled into paying too much for the property. Or, the seller could accept the appraised price, which happens more often than sellers would like to think.

In the case of an FHA (Federal Housing Administration), the appraisal is attached to the house for six months. If the house is in a price range or a market where FHA loans are the norm, they may as well take the appraisal. In other cases, and depending on the gap between sales price and appraisal, the owner may take the lower amount to save the time of starting over, and in many cases, the appraiser is right anyway.

Of course, the seller might terminate or compromise. Unlike Washington, compromise is not a naughty word in real estate and that happens from time to time. Another option is the buyer – who has seen all of the homes on the market and feels the sales price is fair, even if the appraiser does not – can opt to buy the house at the sales price even if it is higher than the appraisal.

Look for these scenarios to continue as the market continues to explode.

Sale of the Week

Although East Nashville has been a hot commodity since the late 1990s, a residence selling for $890,000 raises an eyebrow or two even in today’s sizzling real estate market. With zero days on the market, the house at 1207 Holly Street sold last week for $890,000 or $216 per square foot.

The 4,122-square-foot home contains four bedrooms, three full baths and a half-bath perfectly suited for freshening after a night on the exciting East Nashville neighborhood, now packed with some of the best restaurants in town.

East Nashville was one of he hardest hit areas when the tornado blew through town on April 16, 1998. While there was significant damage to an enormous number of the massive, decades old trees, there was a positive aspect to the storm as most of the houses on the East Side were beneficiaries of new roofs.

Now, these 21 years later, most of the homes are covered by roofs nearing the end of their lifespans. Fortunately, with all the construction through the years since the destruction, there is now a willowing canopy over the area.

The listing agent for the property is none other than Robert Drimmer, a successful Realtor who cut his teeth selling homes in East Nashville and is one of the leading brokers in the area. There is a mandatory and obligatory inclusion of real estate broker Karen Hoff when discussing East Nashville sales.

Although agents like Cindy Evans and Andy Allen were East Nashvillians when East Nashville was not cool and carved a niche for themselves on that side of the river while others were afraid to drive through the neighborhoods, Karen Hoff took the marketing of East Nashville to a new level and has sold hundreds, perhaps thousands of homes on streets that were unknown to Nashville real estate in the mid-1990s.

Now hundreds of agents stake their claim to the area with Robert Drimmer notching his belt with the sale at 1207 Holly Street, a house he describes as a “stunning turn of the century Victorian with two masters.” This Holly Street home served two masters with “one up and one down,” Drimmer says.

Drimmer noted that there is a two-car garage on the property and that 550 of the 4,122 square feet were found in an apartment over the garage.

Madison White who was with Parks when this sale went down, delivered the buyer who beat the rest of the starving crowd of buyers to the home on its shady lot. White’s Facebook page now has her listed as an agent with Central Real Estate Partners.

Richard Courtney is a licensed real estate broker with Fridrich and Clark Realty and can be reached at richard@richardcourtney.com.

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