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Real estate column: It’s a sellers’ market, watch out for low appraisals

By Jamie Flaxman, Realtor with Coldwell Banker Bain
You probably keep hearing the Seattle housing market is hot. Well, it is hot.
“Real estate brokers expected some seasonal slowing during November, but last month’s falloff was less than what some industry veterans anticipated. Members of Northwest Multiple Listing Service reported 6,522 pending sales last month – the highest total for November in six years.” (NWMLS press release, 12/5/12)
Among the highlights of the November data for the Phinney Ridge and Greenwood neighborhoods:

  • Eighteen single-family homes (SFHs) and four condos came on the market during November. Twenty-three homes and four condos went into contract. Sixteen homes and six condos closed.
  • There is less than one month of inventory of SFHs available and 1.3 months of inventory for condos. Generally six months of inventory is a stable housing market, but in Greenwood and Phinney the inventory is much lower. Lower means we have a sellers’ market, higher a buyers’ market.
  • As an example of low inventory, in November 2011 there were 37 homes for sale and 20 condos; November 2012 only 15 homes and five condos. This shows that the market was not moving a year ago, but now homes and condos are selling extremely fast

Another sign the market has improved – in November there was only one short sale on the market for SFHs and one for condos. As for bank-owned (foreclosures), just two SFHs and no condos.
Here’s a graph for Phinney and Greenwood, SFHs and condos combined, showing the number of homes for sale, pending (moved into contract), and sold.

Phinney and Greenwood are currently a sellers’ market (as is most of Seattle and the Eastside). Because there are significantly more buyers out there than sellers, sellers control the market. A good proportion of SFHs and condos are selling above list price. The average condo sales price in November 2012 was $185,000, a 17 percent increase from the prior month. The average single-family home price in November 2012 was $451,000, down a little from October, but up 16 percent from a year ago.
Because there are many homes with multiple offers and accepted contracts higher than list price, we are now seeing appraisals coming in under the contract price. Lenders will require that the seller lower the purchase price to the appraisal and/or the seller will need to obtain a second appraisal, at a higher value. (Generally the buyer pays for the appraisal; this second appraisal would be paid for by the seller.)
If you’re a seller, the most important thing you can do is choose a listing agent who knows the market. Listen to the listing agent when he/she recommends a price. The listing agent will have done research on comparable homes to yours, focusing on recent sales, to come up with a price recommendation.
One of the most important things you can do as a buyer is to choose a local lender. The big banks and online lenders, particularly in a busy market, may send out a non-local appraiser. You live in Phinney and the appraiser is from Tacoma – market conditions and home values are quite different and the Tacoma appraiser may not understand the Seattle market. The second thing you should do is make sure your Realtor is also researching the comparable sales, and before selecting a Realtor, make sure that person is comfortable going to bat for you with the appraiser.
It is absolutely the right time to sell a home. With low interest rates and the market improving, buyers are out there looking and waiting to find the right home. You should be able to sell your home quickly and for market value.
The last item I want to mention is a new analysis from Coldwell Banker, which allows you to compare your home’s value to values in three different cities. You can also look at the national rankings which compare four-bedroom homes in 2,479 geographic areas. Seattle ranks 2,323, meaning that there are only 253 surveyed areas that are more expensive (including Mercer Island and Bellevue).
Jamie Flaxman is a Realtor with Coldwell Banker Bain. She can be reached at [email protected], or 206-790-0081.