The housing crisis warned us all that not everything was right in the real estate industry, including the Jupiter luxury homes market. Over the past decade, new legislation has been set into place to help safeguard against unregulated practices that allowed poor decision-making to be made on multiple fronts when it came to the real estate market. One of these was home appraisals.
Over or Under Valuing Jupiter Luxury Homes
During the boom days of the real estate market, Jupiter luxury homes could have been appraised at prices much higher than what the local real estate comparables were suggesting. Appraisers may have sided with mortgages companies and builders and set prices designed to get a higher profit instead of an accurate price. Housing prices skyrocketed in some areas, like the South Florida real estate market which is a highly desirable, high demand region for home buyers and sellers alike.
Once the housing bubble burst, it became clear that inflating home values to justify higher mortgages was not going to be overlooked by regulators anymore. The Dodd-Frank Wall Street Reform and Consumer Protection Act that clearly set strict separations between mortgage companies and appraisers. Although unscrupulous practices may not have completely disappeared, it is much less of an issue today due to these legislative rules that forbid appraisers from collaborating with banks and mortgage lenders. In fact, these rules may have caused appraisers to undervalue Jupiter luxury homes for several reasons.
Outdated comparable sales
An area that may have had several foreclosures, short sales and other types of distressed properties can lower the comparable sales report run on a particular area. This is a backlash from overpriced homes and subprime mortgages that left some homeowners unable to pay mortgages they were never truly qualified for. Some areas in the Jupiter luxury homes market were affected severely and unfairly.
If an appraiser doesn’t know or reason out why someone else may have paid a certain amount for a property at a specific time in the past than the comparables may not make any sense. You can go through the process of finding the three closest comparable sales and try to make some adjustments in the price for features that differ. Then using this analysis you can arrive at an asking price that really isn’t accurate because of the real estate crash that can have skewed the prices of homes. The truth is coming to an accurate sales price for a Jupiter luxury homes and other properties in South Florida truly takes a combination of many complex inputs.
Out of area appraisers
When the Dodd-Frank legislation was initially passed, appraisal companies were sending out of area appraisers to assess a property as a means to stay in compliance. This resulted in appraisers who did not have a solid handle on an area or neighborhood, producing inaccurate reports that didn’t truly reflect the value of the properties.
The Role of Real Estate Brokers
Although real estate brokers cannot tell an appraiser what a home needs to be valued at, they probably do know more about the local area home sales. It is perfectly fine for a broker to provide direction and assistance to an appraiser by providing them with information that may not be easily attainable. This research may include land records that show off-market sales or other bits of data that could affect a home’s value.
Check out the current listings in the Jupiter luxury homes market and see what types of prices are available in the market today!