How quickly things have changed in the world of high end real estate. In the mid-2000s, seemingly anyone with a six figure income and a heartbeat could buy a multimillion dollar home. By 2008, the real estate market didn't just correct itself – it collapsed. Much has been said about credit default swaps and the crafty moves that banks did to trade on mortgages and they are right to point out how Wall Street's greed played a role in the fall of America's real estate. Where blame should also be pointed is towards the appraisals of homes which in the day were simply crazy.
The unwritten rule about appraisals is that there are two kinds of real estate appraisals: the one the bank gets and the one that a buyer would get. In a perfect world, this wouldn't be true but today more than ever – banks are risk adverse thus they appraise homes for hundreds of thousands if not millions of dollars less than they are worth. This allows them to try to get well heeled buyers to put more and more money down in order to get a loan and leaves the bank with more money and equity in the home.
Appraisals on the buyer side of a transaction are whole different beast even though they supposedly use the same methodology as a bank appraisal. When a home owner or potential buyer of a home seeks an appraisal – they look to the real market value of a home. Not every neighborhood in America has 75 percent of the homes in foreclosure or short sale. Without proper guidance, if a home owner in somewhere like Beverly Hills, Bel Air, Santa Monica, Pacific Palisades or Malibu were to actually list their home at the bank appraisal price – they would have offers within days. They could have also left millions of dollars on the table when selling a home.
Your best advocate in getting a proper luxury home appraisal is an absolute top level real estate agent. Appraisers look for "comps" that are similar to your home to derive a "per square foot price" for your home but what if you home is a 1950's Richard Neutra post and beam home in the Trousdale Estates section of Beverly Hills. Someone like Jade Mills would be able to help the appraisal with the artistic value of a home that is more than just a per-foot price. It's a national artistic treasure. She can help you find the right architect and builder to restore the property or the right photographer to capture the home's design to share with others. An appraiser might miss these little details. A top real estate agent wouldn't.
Nothing blows a high end real estate deal like a low bank appraisal. In Malibu, top grossing real estate agent, Chris Cortazzo, has gone to war for his clients when needing proper bank financing. Banks won't budge without the right appraisal but often appraisers simply don't understand the value of a unique area, lot or home. Comps need to be done using more out-of-the-box methods to get the deal done. Not wildly overpricing a home for the sake of getting a loan but more carefully seeking comparable sales that justify the million dollar prices that sellers need.
There's no question that the game of home appraisals has changes nationwide in the late 2000's perhaps no more so than in the world of high end properties. You need the right people behind you to get deals done in today's market. Loan rates are low and many people want to upgrade, downgrade, refinance and more. Don't let a bad appraisal ruin your deal. Get creative.