Fellow Appraiser Tom Horn shared this great article on 4 Things Agents Can Do To Save Their FHA Buyers Money And Time

May 3, 2018 By Tom Horn

Do You Want To Save Your FHA Buyers Money and Time?

This week I had a situation with an FHA appraisal assignment that I wanted to share with you. The thing that makes this one different from the others is that if it had been handled differently it would have saved the buyers money on a final inspection and they probably could have closed their loan faster.

Appraisals done for FHA financing are typically more strict than for conventional loans. Issues that arise usually fall into 3 categories which are safety, soundness, and security. Safety refers to the health, habitability, and sanitary conditions of the property. Any item that would threaten the occupant’s health is included here, such as peeling paint, frayed wiring, or missing handrails.

The second ‘S’ is for soundness, which relates to the structure and structural components of the home. Examples of these include items such as foundation problems or roof leaks. The last ‘S’ is for security. We’re not talking about whether the house is locked up and secure but whether the property will be good collateral for the loan. Is it worth at least what the buyer is borrowing?

Things that can affect whether it will be good collateral usually have to do with its marketability. Some of the things that can affect marketability include whether the home is near high voltage power lines, near railroad tracks, or some other negative influence. If it is then this may keep people from wanting to buy it from the bank if it went into foreclosure.

In my 28+ years as an appraiser I’ve seen all kinds of issues with homes but today I’ll share with you the top 4 things agents can do to save their FHA buyers money and time.
4 Key Areas To Focus On:

1) Windows– The biggest issue I see with windows is whether they can be easily opened if it is necessary to exit to the outside. This is the perfect example of a safety issue. If there was a fire in the home and the only way to get outside was through a window could it be opened?

Windows in older homes are usually the ones that are hardest to open because most of the time they are painted shut. I did, however, see something this week I had never seen and that was windows that were nailed shut.

They were impossible to open up and I made it a requirement for the nails to be removed so the windows could open and close. For safety’s sake, they should be able to be opened by a small child in case of an emergency.

2) Paint– I’ve written previous posts on the proper way to address peeling paint in FHA loans so I won’t cover that here except to emphasize that if a house has peeling paint it should be removed and repainted. Over the years I have slowly seen conventional loan requirements also require this, so its a good bet that no matter what loan type a borrower chooses the peeling paint will need to be corrected so why not do it before the home goes on the market? Putting it off until the last minute will only result in the borrower paying more and delaying the loan.

3) Appliances– I get questions from agents about appliances frequently. They are concerned that the home may not pass the FHA appraisal guidelines if an appliance is missing.

One of the main things to keep in mind is that an appliance does not have to be present to pass FHA guidelines. If an appliance is missing, however, there cannot be any exposed wiring or uncapped gas pipes.

If an appliance is present it must work properly. A stove that has burners that do not work or a microwave that will not turn on will either have to be removed or replaced.

4) Utilities– As you might expect, all utilities must be turned on for the appraisal observation. Electricity must be on for the appraiser to check the operation of all of the appliances as well as the heating and cooling system.

If the home has gas it must also be turned on to check things such as the heater, water heater, and the stove if it is gas. The water must be on so that the faucets can be turned on and the toilet can be checked as well.

So to recap, agents can save their clients both time and money by making sure that windows open and close, no peeling paint is present, appliances work if they are present, and that all utilities are on. This will ensure that the appraiser does not have to revisit the property, which extends closing time and increases cost for the additional inspection.

Thanks Tom for sharing this great information I hope this information helps you get to the closing table quicker. If you are a homeowner taking care of these repair items before you get ready to list your home will help things go much smoother. If you have any questions or comments contact us or post below.

The only way to possibly see what may be happening in the Tangipahoa Parish Real Estate market in 2018 is to look back at 2017 and over the last ten years. I have been appraising residential real estate in this region for 24 years and what I have witnessed in this parish has truly been remarkable. As everyone knows Louisiana typically goes in the opposite direction when it comes to housing and the economy, but Tangipahoa Parish has basically held its own and appears to be growing each year. So, let’s look at some data using graphs and charts that will make it a bit easier to understand then I will give my final comments. FYI All Data has been compiled using data from the Gulf South Real Estate Network/Matrix MLS only. For sale by owners’ data is not included in the data and charts below.

The data indicates that the average list price has increased from $164,900 at its lowest point during the housing decline to $198,000 or approximately 20% increase since 2012. This indicates a very healthy market has taken place over the last five years after the housing crash of 2008. The market is also indicating that List prices have returned to pre-housing collapse rates and have increased by approximately 2.1% above 2008 values.

The Days On market or DOM indicates the average days a home is for sale in Tangipahoa Parish. As you can see at the time of the housing market collapse in 2008 Days on the market reached almost 120 days with an average of about 80 plus of days on the market; however, since January 2013 days on the market has decreased each quarter indicating a very active market. Mid 2017 DOM were averaging less than 30 days.

This data indicates the sales volume for residential properties started to propel in 2013 as the housing recovery and financing took shape to accommodate the demand for single-family housing.

This data would indicate that currently there is a bit of a housing shortage supply as there were only 568 Active residential properties for sale in Tangipahoa Parish as of January 2018. All Data has been compiled using data from the Gulf South Real Estate Network/Matrix MLS only. For sale by owners’ data is not included in the data

As we review this information and analyze the highest price per square foot average of $101.66; however, this is based on the entire parish base on zip codes in Tangipahoa Parish. As you can see Ponchatoula had the highest number of sales with the Hammond area following this area.

Top 15 subdivisions in reference to sales in 2017

Commercial Real Estate has been fluctuating over the last ten years; however, it appears that the commercial real estate has been increasing since 2013 with a peak in 2017. According to commercial permits form the Tangipahoa Parish Permit department in 2016 Commercial new construction permits equal 16 permits with a valuation of $6,459,065 dollars, and in 2017 that number doubled to 32 permits with a valuation of $10,976,526 or a 70% increase in valuation.

This chart really indicates when the real estate market started to recover in 2013 after declining and being somewhat flat from 2008-2013. The average sold price increased from $149,400 in 2008 to $167,600 at the beginning of 2018. This would indicate an approximate increase of 12% on the average sold price of residential properties in Tangipahoa Parish.

There is another factor that we must review and that is the current atmosphere of available financing. We have been experiencing the lowest mortgage rates in history for the last ten years and as the economy begins to heat up so will the interest rates.

So as the 10-year bond market hits 2.72 that is a signal that interest rates may rise. While they have been at historic lows and may not rise very much when homebuyers hear interest rates are going up it tends to force those on the fence to decide and those that were thinking about buying to have second thoughts.

Six things to keep in mind about rising rates and values

1) Rising interest rates can affect the ability of buyers to afford higher prices because mortgages become more expensive. Unless there is another factor to help prop values up, rising rates can naturally lead to softer values, but rates are not the only driving factor to make the value go up or down in real estate.

2) Demand is strong enough: Rising rates can certainly impact affordability, but the interesting part to consider is we have a slight shortage of housing inventory. This means there is room for some buyers to completely leave the market (or be priced out) because there would still be enough buyers left to afford higher prices. I am very skeptical of articles that say rising rates will not impact buyers at all because it does impact buyers. We do have to entertain the reality of demand being strong enough to a certain extent to deal with some rate increases without much value change (assuming modest increases of course).

3) The squeeze on lower-end buyers: In a market with rising rates, it’s buyers with less money that will be impacted the most because some buyers are on the brink of struggling to afford the market already. Thus, an increase in interest rates that makes a $100 or $200 difference in a mortgage payment can be a very big deal for someone on a tight budget. Moreover, buyers with larger down payments simply have more power when making offers, negotiating, paying beyond appraised value, etc

4) Lenders will get creative: When rates rise it can put pressure on lenders to get more “creative” in their financing so more buyers can keep making loans. In other words, lenders can help buyers afford higher prices with newer and looser loan programs that compensate for higher rates. On a realistic level though, the lending market probably could loosen up a bit in a healthy sense since the regulation pendulum swung very far after the “bubble” burst. For anyone who has tried to get a loan recently, you know how rigorous and stressful it is. Simply put, getting a loan is not as easy as pushing a “rocket” button on a smartphone app. I hope I have made it clear that you understand the value in using local lenders, appraisers, title, and inspection services.

5) Pressure to buy “before it’s too late”: Many buyers feel pressure to get into the market before rates get too much higher, and that’s a dynamic likely to persist throughout this year as discussions about rate increases ensue. It’s as if buyers feel like they have a small window of time to act before they are forever doomed and shut out of the housing market.

6) Now is the time to refinance that home loan if you have not done so and are at least 1.5% higher than current interest rates.

So, what does the real estate market look like going into 2018 for Tangipahoa Parish?

Well, if we had a crystal ball that could tell us for a fact what was going to happen we would all be very wealthy; however, looking at the available data it appears that 2018 will be another good year for Tangipahoa Parish. Presently there is a lot of new construction happening throughout the entire parish and existing inventory if priced right is moving within 30-45 days or less especially at less than $250,000 price range.

We can also look at new construction residential permits to see the new building activity. In 2016 there was a total of 578 Residential New Construction permits totaling $84,122,490 in valuation, and in 2017 there was an increase of 9.34% to 632 permits totaling $94,412,531 in value or 12.23% increase in Valuation. The City of Hammond had 57 new construction permits in 2016 and 84 new construction permits in 2017 that is not included in those numbers.

What does that mean for buyers and sellers?

Housing inventory levels in Tangipahoa Parish have been decreasing over the last number of years this would indicate that you can be aggressive when pricing your home to sell but confirm that you are not overpricing your home for the market and location. Over 85% of buyers’ research on the internet for homes that they are interested in buying; however, many of those resources do not give a realistic value so knowing what a home is worth based on the knowledge of a local real estate appraiser expert will give you the edge when buying or selling.
Knowing what is happening in your neighborhood will give you the right knowledge to price your home at a competitive market price so that your home does not sit on the market giving the perception that something must be wrong with that house because it has been on the market for an extended period of time. Knowing the supply and demand will also let you know what your home will be competing in the market.
Existing inventory of good quality homes and good locations are scarce. So it is important that you utilize all tools to make you successful in finding your home such as using a real estate agent that is familiar with the market that you are considering. Using a local lender that understands your housing needs, finances and can meet with you face to face to address any issues during the loan process. Use an appraiser that also familiar with the market that the home is located and understands the dynamics of the market that you are about to invest in while buying or selling your real estate.

I hope that the information provided is helpful to you. If you need to know the value of a specific piece of real estate a real estate appraisal completed by a certified real estate appraiser may be your best decision. Joseph Mier & Associates is a full-service real estate appraisal firm located in Hammond, LA; however, we serve the Northshore including Tangipahoa, St. Tammany, Livingston, Portions of St. Helena and Washington Parishes. If you have a question or would like to order an appraisal, please contact my office or me for assistance. You can find more information at www.jmappraisers.com

Disclaimer: All information deemed reliable but not guaranteed. The information is meant entirely for educational purposes and casual reading only and is NOT intended for any other use. This information is NOT intended to support an opinion of value for your appraisal needs or to be used for any decisions on investing.

Tag: Tangipahoa Parish Real Estate

4 Things Agents Can Do To Save Their FHA Buyers Money and Time

Market Forecast for Tangipahoa Parish For 2018

So, what does the real estate market look like going into 2018 for Tangipahoa Parish?