How can appraisal account for wild swings in home values?

July 21, 2020 at 12:56 pm Leave a comment

The COVID-related fluctuations in Valley housing prices, marked by a huge downswing in March and culminating in unprecedented increases in June and July, are cause for paying extra attention to home appraiser practices, according to a Phoenix appraiser.

During a ZOOM webinar with local Realtors this week, appraiser Jay Josephs said these “dramatic fluctuations can cause panic in the appraisal industry” because of the recent wild swings in prices paid for home in the Phoenix area over just the past five months.

Josephs said that in March, before COVID-19 affected the marketplace, Metro Phoenix had about 8,900 sales for the month, and the average price per square foot for a home was $231. In April, home sales dropped 19 percent to 7,180, and the price per square foot dropped 8 percent in that one month.

In May, 7,028 homes were sold — a 2 percent drop, while per-square-foot prices plummeted 16 percent to $181, Josephs said. 

Then in June, a rebound to 9,719 homes sold — up 38 percent — with per-square-foot pricing at $197.

“We didn’t think the rise would be that dramatic or fast,” Josephs said. “How does an appraiser account for these changes?”

Josephs told Realtors that when representing a home seller, it is important to meet with the appraiser and provide information about the property they may not otherwise be aware of. He encouraged agents to work with sellers to provide a year-by-year listing of important improvements or remodels to the property, to ensure the appraisal is fair and can justify the selling price. In addition, it is a good idea for Realtors to determine the geographical competence of the appraiser and discuss comparable properties or share details of comparable homes that are significantly low or high.

“Arizona and Maricopa County are positioned really well to come out of COVID from a real estate perspective,” Josephs said. “There is a gravitation from higher- to lower-density markets, and a release of pent-up demand — I just didn’t expect it in June. Our market is thriving.”

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