Appraiser Resources: Due Diligence In Local Real Estate Markets

Posted Filed under Blog.

With the stabilization or increase of real estate values in most cities, the outlook is positive for real estate and new construction. Activity in many markets is high, with a shortage of homes for sale and multiple property offers within short periods of time.

Appraisers should carefully analyze the current local market conditions in their due diligence, to ensure rounded research and a more accurate value of the property.

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An appraiser’s due diligence should include, but is not limited to:

  • Recognition of multiple offers on a single listing
  • Number of days listings are on the market
  • Recognition of offers exceeding list prices that are not the result of seller concessions or creative financing
  • Number of listings on the market
  • Reconciliation of recent paired sales that support a higher adjusted value than dated sales
  • Consideration of possible adjustments for increasing values. (Be sure to give ample supporting documentation of how you arrived at your conclusion)
  • Recognition of increased permits for new construction
  • Recognition of sub-market indicators- school districts, neighborhoods, price points and property types may reflect an improving sub-market faster than the market as a whole
  • Decreased inventory and/or price equalization of distressed sales. The supply of REO as foreclosures has decreased and, in most cases, the sales prices are similar to arms length transactions.

These resources may be helpful when determining current economic health and improving Metropolitan Statistical Areas:

As appraisers, we had to amend our thought processes in the era of declining values. Once again, we must rethink our appraisal processes to provide conclusions that reflect the most current trends and market evidence. When conditions are rapidly changing, we have to expand our normal range of market data and research sources in support of solidly backed opinions.

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