Understanding The Appraisal Process
Agents spend as much time (or more, depend ing on the client) answering questions as they do on paperwork, marketing and showing properties. Some of the most common questions that REALTORS field include how long it takes to buy a home, que ries about fees and commissions, and credit score questions — whether it’s high enough and, if not, how to improve it before applying for a loan. Most agents are pretty quick to respond to these questions because, in part, they’re so ubiquitous. But there’s one area that does tend to stump many residential real estate professionals, and that’s how the apprais al process works.
Steve Kahane, president of the Association of Texas Appraisers, says he can’t stress enough how important it is for agents to understand lenders’ and clients’ role in the appraisal process. It could be the difference between a buyer getting the home of their dreams or that dream home slipping through a client’s fingers at the last minute.
Kahane, an appraiser in Houston for several decades, recently looked at classes approved by the National Association of REALTORS. He recalls that only two mentioned anything about how to value a home.
It’s been much longer than 10 years since the real estate market in Austin-Round Rock has been firmly in the grips of a supply-and-demand para digm: Demand has been extremely high and supply has been painfully low. As a result, since the early
2000s, prices have been on an upward trajectory. And that makes understanding the appraisal process even more challenging. Too many buyers conflate demand with value and it jeopardizes their chances of closing, even after they’re in contract.
When agents can explain how the appraisal process works early on in the negotiating process, fewer deals are likely to fall through. It also means agents can help clients adjust their expectations and stay focused on properties they’ll be able to afford rather than those they believe are in their price range.
The first thing to understand is that for buyers who are applying for third-party financing (not including FHA or VA loans), an appraisal is not an option. All lenders require one. That can be a point of contention for some clients, especially those in Central Texas who seem to be emotionally commit ted to pay any price for a house, no matter how high.
According to Realtor.com, “Your home is [the bank’s] collateral, and if you can’t pay your mort gage, the [lender] wants to make sure they can get back as much of their money as possible.” It’s the appraiser’s job to tell the bank what their risk is. “Risk is always proportional to the rate of return,” says Kahane. “So if it’s a higher risk mortgage, the lender may want the buyer to put more money down or pay a higher interest rate.”
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Mark Your Calendars: Volunteer Call + Boards of Directors Election
ABoR & ACTRIS Boards of Directors Election, Sept. 19–21
CORD SHIFLET 2022 PRESIDENT
Our 2023 ABoR and ACTRIS Boards of Directors election is taking place Sept. 19–21, with results announced Sept. 22. This year we will fill five open positions on the 2023 Boards of Directors. These positions will serve as the governing body of the Association and ACTRIS MLS, representing more than 18,000 real estate profes sionals across Central Texas and beyond. ABoR and ACTRIS Board members directly shape the policies and programs that help REAL TORS® succeed on their terms in the most robust MLS marketplace in the region.
Our annual member-wide election gives members the chance to choose whom they want to represent their voice in shaping our Association and the MLS. Learn more about the election, meet the nominees and view results at ABoR.com/Election
Make an Impact in the Industry: 2023 Volunteer Call, Sept. 15–Oct. 15
It’s time to focus on career development to grow your skill set and business. With the market shifting and rebalancing, there is no better time to volunteer with ABoR, build your network and dig deeper into the industry.
ABoR and ACTRIS now offer more opportunities than ever to be an ambassador for your industry and give back in a way that works with your skill set and schedule. From Sept. 15 through Oct. 15, you can apply to serve on one of our 2023 Volunteer Groups at ABoR.com/ WeNeedYou.
If you have a passion or specialized expertise in finance, advocacy, international real es tate, philanthropic service, or want to be a part of a policy team or advisory group–then ABoR needs you! It is always important to focus on your development, no matter where you are in your career. Therefore, get in on this opportunity to enhance your career and make a differ ence in our marketplace!
Homes By AVI Social Media Class: Debbie Ates of Homes by AVI; Elizabeth Frias and Mary Patterson, both of Keller Williams Realty
NAHREP State of the Market Housing Update: Elle Haynes and Jasmine Chowdhury of Walzel Properties
Coming Soon
New homes are on the way.
KB Home is excited to announce that a new community is coming to Lockhart. Don’t miss this opportunity to be among the first to choose a homesite and floor plan, and lock in a great price for the home you’ve always wanted. It’s the first step in building a house that’s as unique as you are.
Centerpoint Meadows in Lockhart
From the low $300s
• 1,271–2,968 sq. ft.
• 3–6 bdrms., 2–4.5 baths
• Commuter friendly; easy access to Hwys. 130 and 183
• Minutes to shopping, dining and entertainment in downtown Lockhart
• Near sports and outdoor recreation at Maple Street Park, Lockhart Soccer Complex and Lockhart State Park
602 Indian Blanket St. Lockhart, TX 78644 737-477-3030
From Hwy. 130, exit Boggy Creek Rd. heading east. Turn left on City Line Rd. and right on Maple St. to community entrance on the right.
What Does The Future Hold For Williamson County Housing?
MICHELE SHERWOOD 2022 PRESIDENT
I know everyone wants to know what the future holds for the housing market, if only we had a crystal ball. After the 2008 housing crisis, it took six and a half years for the job market to recover. As of July 2022, we have recovered all jobs lost from the COVID-19 pandemic. Even though the labor market is cooling, it is still smoking hot! If you are not losing jobs and unemployment is not rising, you are not in a recession. One thing we know about the Williamson County area is that jobs are plentiful, and our unemployment rate is well below the state average. We are fortunate that we have both a steady stream of busi ness and growth continuing to make Williamson County their home. Two of our cities, Georgetown and Leander have been named the fast est growing cities in the nation, and one of our neighborhoods, Santa Rita Ranch has been named the fastest growing community in the state.
Mortgage applications are down, and we do expect home price declines to return to a healthy market in the next year. A better equilibrium of home prices and lower mortgage rates are expected as well. Mortgage forbearance during COVID-19 added more than six months to the mortgage and proved to be very successful. We have seen delinquencies fall due to stimulus payments during the pandemic and the robust job market. The probability of a recession in the next 12 months is estimated at 25 percent, according to experts. Currently, the biggest challenge that households are facing is inflation.
According to the Redfin data center, the top three areas searching Williamson County from all over the nation, are the San Francisco Bay Area, Houston and Dallas. The majority of migration to our area from out of state has come from California, New York and Illinois. While Texas does not have a state income tax, we make up for it in property taxes.
Over the course of a month, from June 2022 to July 2022, the median sales price in William son County was down 3.96 percent. However, this was still over a 10 percent increase compared to July 2021. From July 2022 to August 2022, the median sales price for the county dropped anoth er $10,000. Over the course of the last two months, the median home price for Williamson County has dropped almost seven percent. We also saw a decrease of 25.2 percent in closed sales in August 2022 compared to July 2022. We are up to three months of inventory, which is an increase of 2.1 months compared to August 2021. We are officially in a balanced market. There are 3,100 active listings throughout the county, which is an increase of over 211 percent in comparison to last year at this time.
Now more than ever, it is imperative to plug into the REALTOR® community and get involved within your association, brokerages and affiliates. Every person you partner with in your business has the opportunity to share wisdom and knowledge about a changing market, as many of them have been through this before. Growth is not expected to stop anytime soon in Williamson County, especially with Samsung, its ancillary businesses, and multiple data centers now calling this area home. Williamson County just completed its biggest tax decrease in county history. It also approved a budget line item to create Regional Opportunity Wilco to start investing in ourselves for business opportunity leads.
I am so excited to see where this market shift takes us. We are Wilco, We are Just North of Weird and we are preparing our members for the shift.
An appraiser is hired to be unbiased in their inspection and evaluation of a property and then assign it an objective market value. Just to be clear, an appraisal is not the same as an inspection. An inspection is for the buyer, an appraisal is for the lender.
Appraisers analyze the condition and location of the home and consider upgrades, renovations and any needed repairs. But if that was everything that entered into an appraiser’s report, then homebuyers in Austin would really be in trouble since the chasm between a home’s true objective value can be miles apart from a seller’s asking price. Appraisers also consider market forces when calculating a home’s worth.
Here’s an interesting quirk of the appraisal process: While buyers pay the fee for an appraisal, they don’t own the appraisal report — the bank does. After all, it’s the lender that’s making the biggest investment in the house, plus, they’re taking a chance on the borrower, too. “It’s one of the few things that consumers pay for but don’t own,” says Kahane.
Another common question that agents get at this point in the homebuying process is, “Well, how much will this appraisal cost me?” Like the rest of the seemingly opaque appraisal process, the answer is, “It depends.”
A quick Google search reveals that in 2022, an appraisal for a single family home in Austin runs anywhere from $450 to $800. Of course, no buyer wants to pay more than they have to, especially in today’s real estate climate. So some clients offer to hire their own appraiser. It’s almost predictable, by the minute, at which point in the purchasing process that tensions will start to flare. Not only do buyers pay the appraisal fee, apprais ers are selected by lenders.
There is some good news, says Kahane. “Loan officers don’t get to pick the appraiser anymore.” To avoid the appearance of pressure or influence, lenders are required to have a separate department, like an appraisal panel or a third party appraisal management company, that handles appraiser ordering and management. Before this process was implemented by consumer protection legislation, there was little anyone could do to
[Appraisal continued from front page] [Appraisal ABoR Rockstar Affiliate Happy Hour: Patricia Perez NAHREP State of the Housing Market Update: Memo Vargas of The Vargas Team and NAHREP President Carol Delgato
deter lenders from putting pressure on appraisers. “In the past, there was a conflict of interest because lenders’ income depended on appraisers making that value so they could close the loan and get their commission.”
The appraisal process doesn’t differ that much from state to state. “Like any laws,” says Kahane, “the federal government sets the minimum bar. Individual states can’t exceed those guidelines.” But thanks to the unique real estate market in Austin, the Texas Real Estate Commis sion provided a contractual addendum that gives buyers a chance to tell sellers what they’ll do in the event that an appraisal is low.
According to Texas REALTORS, the Third-Party Financing Addendum has multiple parts. A
buyer can waive their right to terminate their contract in the event that the lender’s appraisal comes in under the sales price. The financial consequence is that the buyer will have to cover the difference between the loan and the agreed-upon sales price. For a partial waiver, both par ties agree on the limit at which the waiver kicks in. This addendum is not required, especially when a buyer is not interested in terminating their contract based on a low appraisal value.
Kahane says that in his personal experience, most real estate professionals don’t know what appraisers do. “In fairness,” he said, “I don’t really know the day-to-day workings of other real estate professionals, either. But all of us would be better off if we understood these things a little more.”
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Women’s Council Women’s Council Leadership Team
Mid-Year Market Forecast: WCREALTORS 2022 President Michele Sherwood of Keller Williams Realty
AYREP Wine Down and Reset: Jacorey Warrick, Christina Suarez, Mike Oellrich and Burdette Cammack
BNT End of Summer Meltdown: Mike Groneck, Devona Groneck, of BNT of Texas; Cheryl Jenkins, of CKJ Realty Group; Liani Fulgencio, of BNT of Texas; and Ruby Johnson of Urban to Suburban Realty
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RealtyLine is published monthly by Caxton Publications, Inc.™ as a non-subscription publication for the more than 18k+ members of the Austin Board of REALTORS® (ABoR), the more than 1,800+ members of the Williamson County Association of REALTORS® (WCREALTORS) and the Home Builders Association (HBA) of Greater Austin.
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REALTOR Safety: During Showing and Listing Appointments
We have been hearing about Realtor Safety all month. There have been self-defense classes and safety awareness events all across our area, so I hope that you’ve taken the time to attend some of these informative events.
Remember, a true prospective buyer will not be offended by your safety measures. Happy selling and stay safe! We look forward to seeing you at our Bras 4A Cause event upcoming up in October.
NEWS & NOTES SNIPPET
WCR Welcomes Byrne, Valdes, Medina as New Members
LORRIE KENNEDY
2022 PRESIDENT
We are probably the only profession that will answer our phone and agree to meet a complete stranger at a vacant home or schedule a time to meet them at theirs! The later gives a potential assailant time to set up and plan for your arrival. But this IS the way we make our living. So, let’s talk about the logistics now that you are at the house, having gathered appropriate documentation of their legitimate interest in purchasing or selling and give someone your appointment place and time.
• Arrange for someone to call you to ask “How’s it going?” 15 minutes into the appoint ment. Excuse yourself with a brief “this is my safety call.” That in itself might be enough to deter an attacker.
• Arrive at a showing appointment early enough to unlock and crack open all the doors. For a listing, ask to see the back yard first and leave the door unlocked when you re-en ter. Throughout the appointment, keep yourself positioned so that you have an open path to at least one exit.
• Opening the blinds/curtains and turning on all the lights is more than just showing preparation, opening the blinds decreases a potential assailants privacy factor. Turning on a small bathroom or closet light, many times requires that you turn your back, put ting yourself in a more vulnerable position for an attack. Allow yourself time to get this done before the showing is scheduled. For a listing appointment, ask the seller to do it.
• Do your best to stay out of arm’s reach! (This also gives a more open and spacious feel ing to the space you are showing.)
• Finally…..always trust your gut…if it feels off, ask someone to tag along. There is safety in numbers.
We are delighted to welcome Clay Byrne, Cristina Valdes, and Elena Medina to the Women’s Council of REALTORS Austin Chapter. Here are some things they have to say about themselves.
My name is Clay Byrne. Originally from Austin, I have been selling real estate in Central Texas since 1997. My favorite part of my job was finding creative ways to give clients of the Byrne Real Estate Group an extraordinary experience. When I’m not doing real estate, I love spending time with my family and watching my children participate in dance, gymnastics, baseball, basketball, and school activities.
Since 2001, Cristina Valdes, REALTOR® has been helping clients buy, sell and invest in real estate in the Austin area. To build long-term relationships with my clients, I strive to exceed their expectations before, during, and after every transaction. This approach has enabled me to work by referral for the last several years. This is because my clients continue to trust and value my services and refer their friends and family to me for the same quality service.”
My name is Elena Medina. I work at Gateway Mortgage as a Loan Originator. I was born in Monterrey, Mexico, raised in NWI and moved to Texas 14 years ago. I have been in th mortgage industry for over 20 years. I am married with three children. My oldest son Noel is 23 years old and is enlisted in the US Marines. Alex is 12 years old and Isabella is nine years old. Both of my younger children are students in the Hutto ISD. I am also fluent in Spanish.
CLAY BYRNE
CRISTINA VALDES
ELENA MEDINA
AYREP Wine Down and Reset
Realtor CE Day: Alyanna Bondoc and Esmeralda Lopez, both of Choose Charlie Real Estate Team
Mid-Year Market Suzette Whitehead of Realty Texas, Michelle Gundlach and Evan Edmiston, both of Classic Realty
Women’s Council’s Negotiations Panel: Delaine McMurry, Jenny Law, Jen Sparks, Lorrie Kennedy, Alisha Austin, and Kiersten Crawford (Zoom)
An Optimistic View of A Cooling Housing Market
Nationally, mortgage rates have increased sharply, cooling the red-hot housing market. As a result, the housing market has rapidly shifted from a seller’s market to a buyer’s market. A buyer now has more negotiating leverage when it comes to negotiating the terms of a home purchase than they have in two years. Many builders, as well as individuals, are offering substantial incentives toward financing to buy down interest rates or eliminate closing costs.
According to ABOR data, Austin has seen a sharp increase in inventory and a decrease in pending sales. This indicates that fewer buyers are participating in the market. With relatively low competi tion, home buyers have the opportunity to secure the home of their dreams while leveraging mortgage financing and incentives to their advantage. Buyers can take advantage of seller incentives to eliminate most (if not all) of their closing costs, and they will be able to refinance when interest rates fall as the market stabiliz es in the future. It is also possible to use these incentives to buy down the interest rate. This makes purchasing a home much more attractive from a monthly payment standpoint, and increases the buyer’s affordability.
BRETT WISCHNEWSKY LOAN OFFICER HOMEVANTAGE
Experienced mortgage professionals use these techniques to help buyers create financ ing terms that can save hundreds of dollars per month in interest. These “creative financing” techniques can make the difference when buying a home in our current market. I urge you, and your clients to utilize this opportunity to purchase the perfect home despite interest rates. The current interest rate environment is temporary, while securing the home of the buyer’s dreams is permanent.
Cedar Park, Texas
Savannah Rossi (fourth from left) with Priority Title’s Networking Happy Hour
AYREP Wine Down and Reset: Bre Hart, Reagan Sansom, Christina Suarez, Marq Haverty, Pree Poonati and Matt Kirschling
NAHREP State of the Market Housing Update: Blanca Gaztambide, Carlos Gaztambide, Maggie Luce of Cavalier Real Estate and Inelda Brown of International Realty Brokers
HBA Mid-Year Housing Forecast: Nicolle Ramia, Debbie Horridge, Sean Chandler and Kim Allen
Close
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Realtor CE Day: Margie Thurman of Spyglass Realty and Toby Thurman
AYREP Wine Down and Reset
NAHREP State of the Housing Market Update: NAHREP Austin Board of Directors
WCREALTORS City of Georgetown Update: Debby Moran, Roland Watts, WCREALTORS President Michele Sherwood, Mayor Josh Schroeder, Fred Brent and Alisha Austin
Women’s Council Negotiations Panel: Jennifer Lish of Urban to Suburban Real Estate, Kacey Taylor of Choose Charlie Real Estate Team and Carissa Chandler of Austin Summit Group
Women’s Council Negotiations
Panel: Brian Davis, Denise Guerrero, Monica Middleton and Jennifer DeMent, all of BNT of Texas
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Late 2022 117-B Pinnacle Lane Live Oak A 2 1524 3 Bed / 2.5 Bath $377,308
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Late 2022 135-B Pinnacle Lane Live Oak B 2 1524 3 Bed / 2.5 Bath $377,308
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Late 2022 203 Pinnacle Lane Mueller B 1 1570 3 Bed / 2 Bath $405,808
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Realtor CE Day: Adam Gloris and Raluca Fallon, both of Teifke Real Estate; and Brandon Cox
WCREALTORS City of Georgetown Update: Amanda Keeley, Mary Ann Bevell, Phillis Frose and Christina Roberto, all of Freedom Realty Texas
HBA Mid-Year Housing Forecast: Michelle Hansen, Kindra Zepeda and Jenna Hubbard, all of Independence Title
ABoR Rockstar Affiliate Happy Hour: Lisa Waddill of eXp Realty, Laura Fikenbinder and Walter Payne of Sky Realty
BNT
BNT Meltdown: Kylie BNT President Michele Sherwood and Gaby Mendoza of BNT Texas
NAHREP State of the Market Housing Update: Julia Coronado
ABoR Rockstar Affiliate Happy Hour: Emily Bibby, Marq Haverty, Ashley Long, Lauren Huggins and Denise Vincent
AYREP Wine Down and Reset: Heidi Rivera and Ashley Watkins
WCREALTORS City of Georgetown Update: Emily Morris and Cheryl Scully of Austin Title; Robin Hart; and Stephanie Marek of Austin Title
