Market Conditions in 07063>Question Details

Melissa, Home Buyer in 08812

Appraisal Question.

Asked by Melissa, 08812 Fri Aug 12, 2011

Bought a foreclosure last year for 147K, it was appraised before the closing at 250K. We put in about 50K (gutted 70% of it and made many upgrades- kitchen, bath, new insulation, boiler, refinished floors, 90% new electric and plumbing, painted exteriors, etc). Looking to roll in some of our construction costs, so we figured we could refinance. Our appraisal just came back at 210K. We live on a fairly main road (Greenbrook Rd.) and I know the houses are selling for lower than last year, but how could it have dropped 40K? Also, our #1 comp was a foreclosure - is that even allowed to be a comp? I'm trying to figure out if we should fight this, or get a new appraisal? Don't want to waste money if we can't get at least 20K more added to the house value.

Thanks.

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Answers

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Hi Melissa,

A couple things. First, rarely (if at all in this market) do you get a dollar for dollar increase in value for improvements to the property. That said, the improvements you did most likely did not add $50K to the market value of the property even though that is what you paid. Now as for the appraised value dropping $40K since your last appraisal, yes....that is possible. Appraisers are all different (however, they should be fairly similar based on appraisal standards). If you pay for another appraisal, keep in mind it may come in even lower than the one you just had done that came in at $210K. As for appraisers using foreclosures (and short sales) as comps, that is 'allowable'. It depends what the market is comprised of in your area. In most areas these days, the market is mostly foreclosures and short sale. Appraisers have to use comps that have SOLD in the last 3-6 months within a 1 mile radius of the property.

Good luck.

Shanna Rogers
SR Realty
http://www.RealtyBySR.com
0 votes Thank Flag Link Fri Aug 12, 2011
Also, we are in North Plainfield (a block from the border of Green Brook) - not Plainfield.
0 votes Thank Flag Link Fri Aug 12, 2011
I will also point out that Americans are fleeing high tax states like NJ for lower tax or no tax states/countries. I am certain that taxation is very negative for home sellers in NJ.
0 votes Thank Flag Link Fri Aug 12, 2011
147k + 50k = 197k cost basis with an expectation of selling around...197K(if you are lucky)

Maybe you will break even or maybe you will be upside down shortly. You might get lucky and be able to sell for breakeven or it may only have offers at $125k.

In answer to your question, there is not limit on how much a home's valuation can drop in a year. The buyer's market will determine the price.

I contend that today's buyers are tomorrow's foreclosures. The real estate tragedy has just begun.
0 votes Thank Flag Link Fri Aug 12, 2011
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