Thursday’s Thoughts – Watch out home values!

Welcome to April.  Where April showers bring may appraisal nightmares!  You were hoping we were gonna say flowers weren’t you!   Starting this month appraisers are using new forms, with new conditions and new disclosures.  Don’t worry, FHA, VA, Fannie & Freddie have adopted this so there’s no escape.  What does this mean?

Here’s the problem.  Property values have obviously dropped over the last few years and with the new appraising process appraisers are now forced to calculate average property depreciation in your area and reduce the price of the home accordingly.  In short, if you had your home appraised last year for $300,000 and your market has decreased 10% then hold on to your pants because your home just lost $30,000 in value using today’s guidelines.  Typically, appraisers look for other homes that have sold recently in your area.  Homes that are comparable to yours of course.  They would determine your home value by averaging out the sales prices of the most similar and closest homes to yours. With today’s guidelines even if the homes they found were sold 3 months ago they are going to chop 10% right off the top.

We spoke to a couple of local appraisers and they really feel that this is going to further delay home values from increasing due to the new calculations.  If you’re considering refinancing, just understand there is a good chance your home will be worth less today than it was just a few months ago due to these new calculations. This could effect your ability to borrow what you want, your PMI and closing costs due to loan value.

Tune in to tomorrows Friday’s Video.  We’re going to be talking about President Obama’s Making Home Affordable program.  We’ll first cover the refinance portion that will hopefully provide options to the millions of Americans that now have less equity in their homes and no real solution to reduce their monthly payments.

If you’re not planning on selling your home in the near future then just sit back and relax.  Property values will rebound at some point and we’ll all recover from this housing crisis.  Hopefully our retirement accounts will do the same thing!