One we can slay.
Appraisers from all across the country told us; “Agents don’t measure houses. They take the square footage info straight from the tax department. It’s just the way it’s done these days.” The square footage in tax records is notoriously inaccurate. Everyone knows it, but they use it anyway. Getting the accurate square footage details is NOT the tax department’s responsibility. Listing agents have always provided square footage. At least until they discovered online tax records. In the mid-nineties, everything started to change and it has spiraled downward until it is totally out of control. The MLS is NOT the source of real estate information it once was. Now, it is a reflection of advertisements, painting pictures to sell homes. Important things, like square footage, often show only the details listed by the local assessor’s office. The MLS was once the “most trusted source of real estate information in the world.” Now, it is more an advertising website, not the “members only” site it once was, but published for the public. Like hundreds of others; all of which use the property details listed from public records and who are all fighting to attract home buyers – Zillow, Trulia, Yahoo, etc..
The entire home valuation system is based on the simple formula, price-per-square-foot. A formula that only uses two numbers, the home’s size and sales price. But, no one seems to think the size or square footage is very important these days. Wrong; you can’t have it both ways. If you are going to use a price-per-square-foot formula to price houses, you have to use accurate square footage. Just like the CMA’s created by agents using inaccurate square footage produces wrong listing prices, the same problems happen with appraisals. When MLS reports inaccurate square footage, appraisals use the wrong info to compare homes and values come in too low (or sometimes too high, making a seller lose their cool!). With wrong square footage details, home prices are wrong. This is not that complicated. Until we come up with a new way to price real estate, Realtors® need to provide accurate square footage details. No agent needs to measure any listing. However, if you take the listing you should take the responsibility of having the house measured right; before you talk about the price. Until we stop using a price-per-square-foot pricing system, or start getting this info right, low appraisals are going to continue to escalate.
While certainly not the only reason, square footage is one huge problem that helps to create low appraisals. Until the HVCC created monster (Dodd-Frank) goes away or is replaced, we need to do what we can to improve this growing problem of low appraisals. Up to one-third of all transactions are being affected by low appraisals. In a market with fewer transactions already, we can’t afford to lose any. This is a fight for survival. If we don’t work together to fix this problem and agents continue to use public records for square footage, we are playing right into the hands of the mega-internet companies and big banks; all just waiting to replace us (agents and appraisers). Computerized home valuations are growing exponentially and the entire MLS may be replaced by Yahoo or Google or Zillow or Trulia, or one of a hundred others, all waiting to take their share of the real estate pie. Tick Tock…
Low Appraisals and Appraisal Reviews
And once they get into the banking system, they can get lost and make nightmares for all those involved. Appraisal reviews are taking months to complete. The review process means there was a problem with the first appraisals and these reviews are quickly becoming just a way for banks to say no. If the loan needed a review, there must be a problem. Whether there is or not, it doesn’t fit their “process” and anything out of the ordinary is a problem and they don’t want problems, so they don’t dedicate enough resources to take care of the problems and hope they will just go away.
Real estate is very time-sensitive and most banks (at least big banks) just don’t seem to care if these loans and sales are lost. Reminds me of the boom days; everything that fits the perfect mold goes through. They are still fitting the forms and making deals work; that is as long as they are perfect. The problem is, these days, few loans are.
Have it measured. No Realtor has to measure a house. But, if you are truly representing the best interests of your client, you need to know the accurate size. When you create a CMA for this home you are using a price-per-square-foot calculation. With the wrong square footage, your value is wrong.
The list of potential problems with this scenario is huge. Any way you look at it, if you don’t have the accurate first step (sqft) you don’t know the accurate value. Then there’s a very good chance when the appraisal comes in low the agent will talk about those bad appraisers. However, the problem is the listing agent, not the appraiser.
Do it right or don’t do it. Let the professionals keep the profession going before the Google’s and Yahoo’s take over the real estate industry. How much are low appraisals affecting your contracts?