DAN'S PAPERS, November 6, 2009 Page 23 www.danshamptons.com
Rethinking Appraisals–Quick! By T.J. Clemente The slide of the real estate industry on the East End is beginning to show signs of traction. Buyers are looking for values and sellers are attempting to market their homes and properties to maximize the price they can command. This sounds great, but a routine aspect has leant a new dynamic to this process: the bank appraisal. At this time in our economic history, many legitimate buyers and sellers are being penalized by lax practices of the past that may have caused property appraisals to be inordinately high. Too many plum-home equity loans or mortgages that were in excess of 100% of the true value of the home have defaulted. There’s hardly anyone anywhere who wouldn’t admit this was happening during the real estate bubble. Perhaps the correction of these past abuses is becoming an abuse in itself. Now banks are appraising properties in double digit percentages below selling prices to cover banks or other lenders in case real estate prices experience another dip. What this is doing is throwing a monkey wrench right in the middle of the beginning stages of recovery. One local banking official stated off the record, “It may seem wrong but look at the money banks lost, and look at the number of people at banks who lost their jobs trusting real estate agents’ and mortgage brokers’ appraisers.” What she intimated is that there is a new standard of not only putting current market value (meaning the selling price) into the appraisal, but also of recent market trends— meaning the falling values over the last two
years. Until a reliable, credible trend is documented to survive a banker’s scrutiny, this highranking official said, “Don’t expect this practice to change—the new system of accountability has consequences.” When speaking to Bridgehampton National Bank CEO Kevin O’Connor last spring, he explained BNB’s success and profitability were caused by many factors but noted that “due process” on all loans was never lax at his bank. “We never changed our sound business model,” he said then. So now it seems only logical that all banks are going back to basics, and at the moment, maybe factoring recent downward trends in value too much. This isn’t supporting a recovery of the real estate industry on the East End. In fact, it creates tension between buyers, sellers and real estate agents when the bank tells everyone they will appraise a home selling at $825,000 at only $650,000. “They’re trying to be conservative,” said Mike Davis, an associate professor of real estate at the W.P. Carey School of Business at Arizona State University. “They’re not willing to call the shot on the market turning around.” Then there’s the fact that appraising isn’t an absolute science. “It can be a relatively haphazard process,” said Sam Chandan, president of Real Estate Econometrics and adjunct professor at the Wharton School of the University of Pennsylvania. “It’s not like stock markets, where there are pieces of Microsoft being traded at every moment.” But if someone is willing to pay a price, is that not the value of the home? Maybe.
It’s been reported that real estate agents and appraisers are now blaming new rules, collectively called the Home Valuation Code of Conduct, that went into effect May 1. These rules apply specifically to mortgages sold to Fannie Mae and Freddie Mac, and were a result of an investigation by New York Attorney General Andrew Cuomo. Another complaint is that banks are using new appraisers that aren’t truly up-todate on the markets they’re appraising. Some believe banks have chosen appraisers from lower-income areas to appraise homes in higherpriced residential areas in order to keep appraisals from being overpriced. This is disturbing to many agents, buyers and sellers, who now feel that government oversight must be introduced so that the buyer, seller and even the real estate agent are protected from underappraising. As one seller said, “I, too, should have some protection on my asset. If a buyer wants to pay me $825,000 for my home, why should a bank appraiser be able to come in and say my home is only worth $700,000? That is an injurious action.” Appraisals were once tools to find the true values of homes, not mechanisms to protect banks from worst-case scenarios. Due diligence shouldn’t mean compensating for past mistakes by establishing incompetent practices. The good news is that the problem is being exposed, which may cause some banks to consider how this practice is preventing the real estate market from getting stronger, thus reducing their financial risk on existing home mortgage loans.
EVERYTHING OVER A MILLION Sales Between 07/18/2009 and 10/08/2009 The most reliable source for real estate information
BRIDGEHAMPTON
REMSENBURG
Lionsgate LLC to Bertrand Chan, 69 Kellis Pond Lane, 3,900,000
Larry Weinberger to Sally B & Michael J O'Connell, 46 Club Lane, 3,000,000
Edward M Lederman to Deirdre & Colin McKechnie, 77 Jennifir Lane, 3,625,000
SAG HARBOR
Estate of Thomas Wade to Peter J & Lisa B Zippelius, 40 Hildreth Lane, 1,325,000
Paul & Kristin Davey to Mary Rooney, 342 Old Sag Harbor Road, 1,600,000
Robert & Michele Jaffe to Pearce-Leena Bhutta, 3 Long Pond Trail, 1,190,000
EAST HAMPTON
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Eckley B Coxe Trust-Jeffrey L Gates-37 Ocean Avenue, 8,300,001
SOUTHAMPTON
Harold M Wit-FAE Holdings 404999R LLC-59 Cross Highway, 5,000,000
Aubrey Balkind to David Moore, 327 Downs Path, 5,200,000
William Candelaria to East Hollow Properties LLC, 29 East Hollow Road, 4,325,000
Olde Town Villas LLC to Bill Bill LLC, 456 Old Town Road Unit 500,2,275,000
Thomas Arthur to Karen Magovern, 287 Kings Point Road, 1,950,000
SOUTHOLD
Joanne Brannon to William E McCaffrey, 19 Cooper Lane, 1,150,000
Robert J Dier to Teressa T & Jonathan P Wendell, 355 Terry Lane 1,250,000
Thomas J Griffith to Daniel J & Cheri C Rothman, 25 Buell Ln Extension, 1,375,000
WATERMILL
Wonja & Allan Papp to Adam Barnett, 47 Sunburst Lane, 1,117,000
Jane M Delaire to Rachel & Peter Graham, 340 Rose Hill Road 2,800,000
Jorge O Mariscal to Henchie Holdings LLC, 26 Beech Street, 1,400,000
140 Dune Road LLC to Matthew Wolf, 140 Dune Road 2,565,000
MONTAUK QUOGUE
> All Residential and Commercial closed sales in your area
WESTHAMPTON
Maurley Miller to Dupre-Emily Loft-Wagshal, 38 Old Meeting House Rd 1,475,000
1
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Sales Of Not Quite A Million During This Period1 CUTCHOGUE Robert P Dougherty to Charmaine E Henderson, 540 Cedars Road, 540,000
EAST HAMPTON
> The most up-to-date information available
Phyllis & Marshall Goldberg to Rita Sanchez, 5 Wigwam View Lane, 965,000 Stella A & Richard S Slavin to David T Herman,129 Malloy Drive, 800,000
EAST QUOGUE Elizabeth Petrillo Feinman to Ed Sturmer, 38 Walker Avenue, 799,000
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Matthew H & Desiree Gagliardotto to Linda R McKinnon, 9 Corbett Drive, 720,000
GREENPORT Phyllis T Garbe to Lisa Israel, 685 Osprey Nest Road, 970,000 Harriet Propper Trust to David Bofill, 32 Stirling Cove, 775,000
HAMPTON BAYS
1143168
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SHELTER ISLAND
Rory E Kennedy to William & Lisa Friedlander, 58 Saint Marys Road, 2,967,000
Flex Development LLC to Genevieve & Daniel Justus, 5 High Road, 550,000
REMSENBURG
Robert & Paulette Rosen to Michael & Diane Taylor, 4 Mallard Lane, 990,000
RIVERHEAD Riverhead Reeves Associates LLC to Cara M Schelp,109 Star Flower Row, 614,900
SAG HARBOR Janet C Flora to John H Shaw, 12 Partridge Drive, 726,000 Leslie J Edwards to Kathleen J & Edward J Jaworski,34 Joseph Francis Blvd, 510,000
SHELTER ISLAND Mary A Dickson to Robert V & Moira Moderelli, 27 Grand Avenue, 654,000
WESTHAMPTON Jennifer Fable to Prudential Relocation Inc,15 Clover Grass Court, 775,000 Prudential Relocation Inc to Abigail P Connett-15 Clover Grass Court, 775,000 May Ng to Abatangelo Family Trust, 162 South Road, 650,000
MATTITUCK
Linda F & John Kowalski to Rizzo Group LLP, 780 Ole Jule Lane, 650,000
MONTAUK Susan & Girard A Fox to Kevin & Eileen K McCann,11 Sanger Place, 665,000
Data Provided by Long Island Real Estate Report