Broker frustrated by bidding wars

Broker frustrated by bidding wars

Broker frustrated by bidding wars Brokers are once again venting their frustration with the discrepancy between appraisal prices and sale prices of homes; though it isn’t the appraisers’ fault, according to one broker.

“The value of properties is one of the most frustrating things I’ve faced in my business; a lot of times clients engage in bidding wars and in many cases the offer comes in and it is well above the appraisal value,” Christine Xu of Mortgage Architects told MortgageBrokerNews.ca. “Many people are over-paying for homes.”

Several industry players have complained about, what they believe to be, outdated and inaccurate appraisals and have called for a reform that will take into account other valuations when deciding the value of a home.

“Appraisals aren’t coming in at the proper value; they’re not coming in at purchase price,” Anthony Ambrosio of CSI Mortgages told MortgageBrokerNews.ca in mid-June. “The appraisers look at market data that is old – they’re always looking backward and not forward.”

According to Ambrosio, homes he is having appraised now are being valued at winter prices, when the market was slower and prices were lower.
But it isn’t the inaccuracy of the appraisals that is the issue, according to Xu. It’s the dearth of housing supply that is causing inflated prices.

“Because of the hype of the market people in the hot areas, people want to buy properties and there aren’t too many available,” Xu said. “Once a property becomes available there are many buyers interested in purchasing it.”

Multiple bids ensure homes in many hot markets sell within ten days, according to Xu.

“Many people are over-paying for properties.”
 
4 Comments
  • Rick (Mortgage Mentor) Robertson 2014-07-03 12:59:20 PM
    Lenders are not fully interested in "Market Value". The successful, thriving Canadian banking/lending system's conservative perspective is "Lending Value" and consideration for what the lender may be able to sell the property for in the future if the borrower defaults. (After all, that same real estate market that pushes selling prices up is the same group that heavily promotes foreclosures as being a "deal".)

    If I were the lender and believed there was any size of a market bubble, I would not be basing my lending calculations on a suddenly inflated "Selling" price.

    That is mostly the reason that we will not see private lenders and M.I.C.s lending more that 80% today.

    Just because some realtors are good at creating "market excitement" and getting a high price for a listing, doesn't mean that appraisers or lenders are obligated to change their time proven practices.
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  • Ian March 2014-07-03 1:17:23 PM
    The Major problem is that certain lenders are not declining when a home is sold over price. I am involved with new and resale homes and I see the discrepancies. In Ontario Government is also to blame requiring too high a density which artificially pushes up prices.
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  • Jay 2014-07-03 5:00:45 PM
    When one or more parties get caught up in the excitement of a bidding war, the psychological effect can be extremely powerful. This does not necessarily mean that winning bid equates the actual market value. What it can mean is that people get caught up in the emotion of it all. When an appraisal comes in below the frantic bidding war price, it can also mean that the appraiser is saving the buyers from themselves. An informed broker will be grateful for the fact that his clients were just protected and if the clients are brought up to speed then they will/should be happy and spread the work about their wonderful caring broker and the fine upstanding appraiser. In the short run, sure the broker doesn't get that immediate commission, but in the long run it pays off huge in positive word of mouth and a great reputation that money just can't buy.
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