Charles Blumenkehl, managing partner for Blue Asset Management LLC, sees home appraisals causing difficulties for buyers trying to obtain mortgages on their dream homes and consequently for sellers of real estate in today’s market.
According to Blumenkehl, “On the one hand, home values are determined by how much a buyer is willing to pay for a particular property. On the other hand, in order to protect their investment, lenders require the property to appraise for the purchase price in order to assure that the loan to value ratios required for the particular mortgage are maintained.” Blumenkehl continued, “the problem today is that so many homes that are sold and which appraisers can use as comparable sales in completing their appraisals are based on foreclosure prices and prices established through short sales, where the seller is willing to sell their property at a deep discount and the lender is willing to accept these deep discounts rather than wait to complete the over-capacity foreclosure process and all that comes with it, including carrying and maintenance costs and loss of earnings on the remaining principle that could potentially be sustained by the mortgage-holder”.
“The result”, concludes Blumenkehl, “is that today’s seller is not only subject to competing with these foreclosures and short sales when marketing and pricing their homes, but the price the buyer is willing to pay will be subject to how much the distressed and foreclosed properties in the market will sell for.” This leads to many under-valued appraisals, Blumenkehl says, which in turn will require sellers to either further reduce their already depressed sales price or try to find a new buyer and hope the next appraisal is higher. Blumenkehl also pointed out that in many types of sales, such as FHA or VA financed transactions, the seller is stuck with the appraised value even if another buyer is willing to pay more but requires the same type financing, since the appraisals are registered with HUD for a 6 month period. Blumenkehl says his fund has opted to hold certain properties that have under-appraised and achieve high rates of return on renting the property while he waits for the market to return rather than sell at over-deflated prices.
Charles Blumenkehl, a 30+ year veteran of real estate management in New Jersey, founded Blue Asset Management LLC in 2008 to leverage what he saw as opportunities that arose as a result of the mortgage crisis leading to the foreclosure crisis. Blue Asset Management LLC is a buyer of performing and non-performing residential and commercial real estate mortgages, distressed and investment real estate in northern New Jersey. For more information about Blue Asset Management LLC log onto the company website at www.blueassetmanagementllc.com or call the company directly at 973 83-1400.