Neighborhood "Hotspots" Make For Tricky Appraisals

8 / 12 / 11

By: Jill Urban

Various "hotspots" in the city are seeing a surge in growth, which could throw off appraisals in some neighborhoods. NY1's Jill Urban filed the following report.

As the real estate market slowly rebounds, most sellers are happy to see prices on the rise, but sometimes selling in an up market can have its downs.

Some sellers are finding that appraised values in certain areas are not rebounding as quickly as the prices.

"The recent issue that we've seen is that there are these micro-communities that are doing really well in this real estate market whereas the market in general might not be doing as well, and in those markets we are seeing new highs being made, but appraisers are not necessarily taking those micro-markets into consideration," says Doug Perlson, CEO of RealDirect.

Perlson says right now there are hotspots in the city that are areas seeing far more growth than the rest of the neighborhoods around them. If an appraiser is looking at comparables outside that very specific area, the unit could be undervalued.

"For instance, in the Sixth Avenue corridor in Chelsea, we're seeing a lot of strength, but the entire Chelsea market all the way to West Chelsea might not be as strong as that particular micro-market, but it's a unique market and unless you are looking at comparables in that micro-market, you're not going to have comparable set that's appropriate," says Perlson.

Aside from Sixth Avenue, he says he's also seeing this phenomenon a lot in the Clinton Hill area, Central Greenwich Village, Park Slope and Brooklyn Heights, especially with larger units.

Even a minor discrepancy in value can throw off a deal, so what can buyers and sellers do? Perlson says a seller or a sellers' broker should be at the appraisal armed with a list of appropriate comps to ensure that the appraiser understands that unique market hotspot.

If the appraisal still comes in low, he suggests contacting the bank immediately to order a new appraisal. There will be a cost for that and the case will have to be made as to why it's necessary.

If that doesn't work, it's up to the buyer and seller to work it out.

"My advice to sellers is you want to really make sure this doesn't kill your deal. In this market, that one buyer may be your only buyer, so make it happen," says Perlson.

A reduction in price may be the price sellers have to pay to close the deal.

Back to Media Coverage