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Bucks County real estate: What happens when big bid is over the appraisal in hot housing market? – The Intelligencer

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Video: Renovation work planned at Washington Crossing HIstoric Park

The Pennsylvania Department of Conservation and Natural Resources announced an $8.7 million renovation project at Washington Crossing Historic Park.

Peg Quann, Bucks County Courier Times

The demand for housing in Bucks and Montgomery counties has skyrocketed this year, as the local economy pushes itself out of the pandemic. For months now, bidding wars among buyers have pushed prices up to unprecedented levels.

“Buyers are ravenous and desperate, which makes for no slowing of the market,” said  Alex Shnayder, a real estate attorney and agent with Re/Max in Feasterville.

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But as many buyers are bidding higher than the asking price, some appraisals that help finance these hot market transactions are coming in too low to seal the deal. What’s a buyer to do when the appraisal needed for a mortgage doesn’t come in near the price they’re offering the seller?

It’s a tricky question, Realtors and mortgage brokers agree. And one that can stop a sale in its tracks. 

“I’ve had several sales where people overpaid, and then when the appraisal came in, they had to come up with an extra $30- or $40,000,” said Jill Kohler of Net Equity Financial in Langhorne. 

Mortgage commitments are based on the appraised value of the home. A lender might not agree to finance a purchase if the money needed to complete the sale is more than the home is worth in the eyes of an experienced appraiser sent out by the mortgage company to check out the property.

For example, if a buyer bids $300,000 for a home, but it only appraises for $280,000, the lender might only agree to lend money to complete a transaction to that amount.  The buyer will be left to come up with the extra $20,000 to go to settlement, or lose the home.

“I’ve had a few people cancel the transaction because the appraised value didn’t come in close to the price,” Kohler said.

And home prices are only going up in Bucks and Montgomery counties.

The Long & Foster Market Minute shows that the median home price in Bucks rose from $340,000 last June to $420,000 this year, a 24% percent increase with the average sale price being 101.5 percent of the asking price. And the inventory of homes for sale remained low at 763 in June, though it rose 13% from May’s 673 homes available.

In Montgomery, the median sale price was $380,000 ,or 15% higher than the $330,000 median sale price in June 2020. The average sale price was 102.2% higher than the asking price and the number of homes for sale was 1,054, a 10 percent rise over the 962 available in May. 

Looking back at the 2020 market: With mortgage rates at historic low, it’s a seller’s market as buyers hunt for homes

The concern about appraisals in a market driven by multiple offers and bidding wars contributed to the Pennsylvania Association of Realtors introducing a new “Appraisal Contingency Addendum to Agreement of Sale” form on July 1 to help move sales along.

The form now provides two options for buyers facing this dilemma. 

They can either agree to Option 1, which states that if the appraisal is too low, they will opt out of the deal, or renegotiate it with the seller, or Option 2, that basically means that even if the appraisal is low and they need to come up with other funds, they will proceed with the sale.

“The (new) Option 2 — the point is to allow buyers to signal very strongly to the seller that they want to move forward with the deal one way or the other,” said Hank Lerner, a PAR attorney. This way, the sellers won’t be worried that the buyers’ offer will fall through if the appraisal comes in lower than expected.

PAR President Christopher Raad said that the state organization has been having webinars with Realtors to explain the options so that their buyers know which is the best one they should pursue — “whatever they are most comfortable with.”

Kohler also said that people buying a home must have incomes based on their salaries, not on unemployment compensation. Because of that, and COVID restrictions, many people put off buying a home last year but the market really fired up this year, as workers get their jobs back and could qualify for a mortgage. 

In the past month, the inventory of homes for sale has also increased slightly, Long & Foster noted, as sellers who may have hesitated during the pandemic have decided to put their homes on the market since they most likely will get close to or more than their asking price.

Lenders generally will approve a mortgage based on the sale price or appraisal, whichever is lower, but “a lot of first-time buyers don’t have cash on hand if they need it to keep a sale going when the appraisal comes in low and the mortgage company caps the loan amount they will finance. The trade-up buyers will have the cash,” Kohler said, to be more creative in trying to deal with this situation.

Because interest rates are still so low — hovering around 3% for a 30-year fixed rate mortgage — mortgage lenders are also busy with refinancing deals in which appraisals are also involved. 

Maureen Fox, an appraiser based in Doylestown, said she knows “people are absolutely bidding over the asking price, but she said she can only go with what the market will bear in making an appraisal. Appraisers base their valuations, among other factors, on comparable homes sold in the last six months. 

A mortgage is based on loan to value ratio and the value is the appraised price, not the bid price, Fox explained.  

“If the market isn’t there to support the sale price, there’s nothing I can do. I’m hired by the lender, not the borrower,” Fox said, even though lenders include the cost of the appraisal in the mortgage fees to borrowers.

Bob Hawley, a Realtor with Long & Foster in Yardley, said that in most cases, the lender will allow the buyer to put less down in payment to the mortgage company and raise the monthly mortgage payment to make up the difference. 

“It’s really not a huge issue,” he said for many buyers. 

Neither real estate agents nor buyers like when the appraisal comes in less than the sale price and the buyer has a hard time coming up with the extra funds needed, Fox acknowledged. This is especially true with first-time buyers who may have already used most of their disposable income to make a down payment and pay closing costs.

Shnayder said that every buyer should know what they can really afford to spend in a mortgage payment before putting in an offer on a home. 

“Know your plan, your limits and know what Plan B is,” he said, whether that involves receiving a gift of funds for the extra money needed from a relative, or looking for another house that will make the financing of the purchase easier and more affordable.

And if you do sell your current home, since most sellers don’t want to entertain offers from buyers who still must sell their home, know where you will stay temporarily if a deal falls through and you need to look for another home.

“Rentals are tough to come by,” Kohler cautioned, because so many people are trying to make deals now while interest rates are low. 

One good thing, Fox said, is that Bucks County has a variety of homes for sale at different prices. 

“I’m a big believer (that) location is so important. You can get a lot of nice locations in Bucks County,” she said even if the buyer has to choose a fixer upper or to drive a longer distance to work in order to get a home they can afford.  

And, as appraisals are based on homes sold recently in the same community, the value of the property could rise as well, she noted. 

Ironically, Fox said she and her husband had to give a seller an extra $30,000 out of pocket to keep their deal going when the appraisal on a vacation home they were buying at the New Jersey shore came in under the price they bid.

Within a couple of months, the prices were matching the price she paid, so she felt she got a good deal. “I don’t regret buying the house for a minute,” she said. “I love it.”

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Vatican Owns Over 5,000 Properties Worldwide, It Reveals In First Disclosures On Its Real Estate Holdings – Forbes

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Topline

The Vatican owns more than 5,000 church and investment properties around the world, a central office at the Catholic Church revealed for the first time Saturday, according to several news outlets — but the church is struggling with a budget deficit, plus years of alleged mismanagement tied to its investment strategy.

Key Facts

Most of the Vatican’s real estate holdings (4,051) are in Italy, the majority of which are used by church-affiliated groups or rented out at reduced prices instead of getting leased at market rate, according to a report from the church-run Administration of the Patrimony of the Holy See (APSA) obtained by Reuters, Catholic News Service and other outlets.

APSA also reportedly holds over 1,000 properties in London, Geneva, Paris and other cities outside Italy, including a London real estate investment the Vatican controversially sank more than $400 million into nearly a decade ago.

Forbes has reached out to the Vatican for comment.

Tangent

The Roman Curia — the Catholic Church’s central administrative body — ran a $76.3 million operating deficit in 2020, down from a $93.2 million deficit in 2019, according to a budget statement obtained Saturday by the Jesuit America magazine. In an interview with the church-run Vatican News, church official Father Juan Antonio Guerrero Alves called the Curia’s 2020 performance “better than what we expected,” partly because the church slashed expenses during the coronavirus pandemic. The church reported a larger overall deficit in 2020 than 2019, however, largely due to a drop in unrealized financial gains.

Key Background

The Vatican’s financial practices — and particularly its real estate holdings — have drawn scandal and scrutiny for years. Pope Francis reorganized how the church’s real estate investments are overseen last year, following years of sometimes fraught attempts to reform the Curia amid claims of embezzlement and endemic financial mismanagement. Several people are on trial for allegedly scamming the church out of millions of dollars in connection with its London real estate investment nearly a decade ago.

Further Reading

Behind the Vatican’s London real estate scandal (Associated Press)

Vatican reveals property holdings for first time in transparency drive (Reuters)

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LACKIE: As life — and T.O. real estate — gets back to normal, what's next? – Toronto Sun

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The Toronto real estate market, having boomed for the better part of the pandemic, is finally taking a rest

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Is it just me or is life starting to feel a little normal again?

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Summer is in full swing, restaurants are open for business, and vaccines are now pretty easy to come by.

The pandemic is far from over, but still there’s a subtle ease to life again that feels good.

Perhaps it was this week’s announcement that the federal government would be moving forward with reopening the Canada-US border in early-August.

Or the news that Ontario’s colleges and universities would be returning to in-person classes this fall.

Things are inching back to a pre-pandemic status quo.

The Toronto real estate market, having boomed for the better part of the pandemic, is finally taking a rest. Things are quiet. It’s lovely.

Which begs the question: what comes next?

While most experts agree that it was a combination of low interest rates, pent-up demand, and changing buyer priorities that joined forces to drive sales to record levels, even through multiple stay-at-home orders, the undercurrent of it all has been something entirely more structural.

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A healthy balanced market is when, simply put, there is an equal level of buyers and sellers.

When there are more sellers than buyers, you have a “buyer’s market.”

When you have more buyers than sellers, you have a “seller’s market.”

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Broadly speaking, with the exception of a few blips along the way, Toronto has been a seller’s market for as long as I have been in the business.

In the neighbourhoods popular with upsizing young families, bidding wars are simply the norm.

And why is that? Some might say that it’s because of the widely adopted practice of underpricing as a means of driving multiple offers.

And while, yes, that certainly brings more buyers to the table and thus adds an overt layer of competition, that’s not it. It’s just a symptom of the broader issue.

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And this issue is this: if we had sufficient supply in the city of Toronto to meet demand, our current market conditions would be vastly different.

They wouldn’t be spilling out into the secondary markets around us.

The pandemic just shone a light on what has been a mounting reality: our population has grown faster than our housing supply and our government has failed to address it.

At 1.8 million homes behind the G7 average, Canada falls dead last in the number of housing units per 1,000 residents.

Frustratingly, the top-down solutions to this impending crisis have been interruptions to the demand cycle: playing with interest rates, tightening lending qualifications, introducing non-resident speculation and vacancy taxes.

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These are Band-Aids. At best they are tools to be used to slow things down while the real solutions come down the pike. We need density. We need intensification. We need thoughtful, strategic building policies that marry environmental responsibility with pragmatic solutions to sprawl.

Instead, the most recent federal budget promised an additional $2.5B over five years to address affordable housing via their Rapid Housing Initiative.

This is a drop in the bucket.

We need expedience not hand wringing.

If government flipped a switch tomorrow it would still take four to five years to see the housing units come to market. The time was yesterday.

So, for those wondering what comes next in our real estate market, it’s a safe bet that once people have enjoyed their summer of reprieve from the strange pandemic reality we find ourselves in, the market will reawaken.

It will simply have to in order to meet the return of students and the backlog of immigration produced by almost 18 months of closed borders. The demand-driven rental and condo sectors that have “softened” and “balanced” these past months will surely surge.

And it was predictable. Market forces, while undeniably complicated and nuanced, have a few inescapable fundamentals – until we prioritize sufficient supply to meet demand, housing unaffordability will be the norm. That part isn’t rocket science.

On Twitter: @brynnlackie

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Real Estate newsletter: A billionaire buyer revealed – Los Angeles Times

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Welcome back to the Real Estate newsletter, which arrives on the heels of a mystery being solved.

Reporters and readers alike have been trying to figure out who paid $25 million for San Marino’s famed USC presidential mansion, and records finally revealed that the buyer was Chinese billionaire Tianqiao Chen. It makes a lot of sense, as the philanthropist recently donated $115 million to Caltech for neuroscience research, and the university dedicated a new 150,000-square-foot facility to him that opened earlier this year just a mile away from the home.

It’s still a great time to sell, and this week saw a few celebrities test their luck in the high-risk, high-reward real estate market. “Charlie’s Angels” star Shelley Hack did about as well as one can do, selling her Santa Monica Craftsman for $11.43 million — or $2.58 million more than her asking price.

Actress Helen Mirren and director Taylor Hackford are hoping for similar success in Hollywood Hills, where their colossal compound on 6.5 acres is on the market for $18.5 million. If the power couple get their price, it’ll be one of the priciest sales the ritzy neighborhood has seen so far this year.

If you don’t believe me regarding the seller’s market, believe the data. The numbers are in for June, and Southern California’s median home price soared to $680,000 last month. That’s an all-time high, shattering a record that stood for all of … 31 days.

Some news on what may come ahead: UC Berkeley researchers published a new report on a California Legislature bill that would allow denser home building in single-family zones. The study says the bill, which passed the state Senate, would produce an uptick in the state’s housing supply, but it likely wouldn’t cause the mass redevelopment that skeptics fear.

While catching up on the latest, visit and like our Facebook page, where you can find real estate stories and updates throughout the week.

Billionaire buys USC house

The seven-acre grounds center on a 14,000-square-foot American Colonial-style mansion surrounded by sprawling lawns.

The seven-acre grounds center on a 14,000-square-foot American Colonial-style mansion surrounded by sprawling lawns and English rose gardens.
(Compass)

When USC’s presidential mansion set a San Marino record by selling for $25 million in early July, it was initially unclear who the buyer was. Real estate records now show it was purchased by Tianqiao Chen, a Chinese billionaire with deep philanthropic ties to the community.

It was pure circumstance how he first came to the area. While watching the news, he and his wife, Chrissy, saw a story of a Caltech scientist helping a quadriplegic man use his thoughts to control a robotic arm and grab a beer.

Shortly after, the couple flew to Pasadena to meet the scientist — a trip that led Chen to give Caltech $115 million for neuroscience research, one of the largest gifts the university had ever received. In 2016, he founded the Tianqiao and Chrissy Chen Institute for Neuroscience at Caltech complete with a three-story, 150,000-square-foot facility on campus that was dedicated to the couple earlier this year.

He’ll have a short commute if he ever visits it, because his home sits about a mile away from the facility.

Actress gets way over asking

The half-acre estate includes a 99-year-old Craftsman, one-bedroom guesthouse and rustic barn surrounded by gardens.

The half-acre estate includes a 99-year-old Craftsman, one-bedroom guesthouse and rustic barn surrounded by gardens and fruit trees.
(Noel Kleinman)

In the latest example of Southern California’s seller’s market, “Charlie’s Angels” actress Shelley Hack sold her Santa Monica Craftsman for $11.43 million — or $2.58 million more than she was asking.

Hack and her husband, director Harry Winer, are walking away with a huge profit. Not only did they haul in significantly more than their original asking price of $8.5 million, but they also paid just $1.6 million for the property in 1988.

The secluded compound sits about a mile from the ocean in Santa Monica’s North of Montana neighborhood. Across half an acre, there’s a 99-year-old main home, one-bedroom guesthouse, rustic barn and manicured backyard with a deck and pool surrounded by gardens and fruit trees.

Power couple will either sell or lease

The 6.5-acre spread includes a main home, guesthouse and apartment that combine for nine bedrooms across 10,200 square feet.

(Marc Angeles)

Space is at a premium in Hollywood Hills, but not on the sprawling hillside compound of actress Helen Mirren and director Taylor Hackford. The power couple’s longtime property, which spans 6.5 acres at the foot of Runyon Canyon Park, listed for sale at $18.5 million.

If you’re eyeing a shorter stay, it’s also available to be leased at $45,000 per month.

At 6.5 acres, it’s the second-largest property currently available in Hollywood Hills. To put its relative size into perspective, only three estates on the market in the star-studded neighborhood claim more than 3 acres.

According to the listing, there have only been four owners — all famous — since the home was built more than a century ago: “The Squaw Man” actor Dustin Farnum, writer Mark Hellinger, “Perry Mason” producer Gail Patrick, and Mirren and Hackford, who acquired the estate in the 1980s.

SoCal home prices break another record

A for sale sign starts the bidding on a house in this cartoon

Southern California’s median home price surged to $680,000 in June.
(San Diego Union-Tribune)

Southern California’s real estate market hit another historic peak in June, with home prices soaring to yet another all-time high, though analysts see the extreme bidding wars of the last year beginning to ease.

June’s median home price of $680,000 tops the previous record of $667,000, set in May, according to data released Tuesday by data firm DQNews. It represents a 22.5% increase from June 2020, when the market in the six-county region slowed significantly as sellers pulled homes off the market because of COVID-19 stay-at-home orders.

Since then, a dramatic rebound has seen 11 straight months of double-digit median home price rises.

Experts credit multiple factors: the fast-expanding buyer market of millennials, more demand for space as more people work from home, and ultra-low mortgage rates, which are attracting wealthy investors who compete with the middle class for limited housing stock.

Housing bill put in perspective

A new bill would allow most lots now zoned for only one house to have up to four units.

(Willis Allen Real Estate)

A bill advancing through the California Legislature to allow for denser home building in single-family zones would be likely to produce an uptick in the state’s housing supply, but the so-called upzoning probably won’t cause mass redevelopment, according to a report published Wednesday.

Andrew Khouri and Ari Plachta write that the study by the Terner Center for Housing Innovation at UC Berkeley offers the most detailed analysis yet of the potential effect of Senate Bill 9, designed to allow up to four homes on most single-family lots and spur the construction of badly needed new housing.

Because of the way unit development would pencil out, the study found that “the vast amount of single-family parcels across the state would not see any new development,” said David Garcia, policy director at the Terner Center, which supports the bill written by Senate President Pro Tem Toni Atkins (D-San Diego).

SB 9 passed the state Senate and is expected to be taken up in the Assembly Appropriations Committee by Aug. 27. If approved, it would go to a final vote in the Assembly and then to Gov. Gavin Newsom’s desk. The Terner Center study found that under the bill, a total of 714,000 new homes would make financial sense to build, and it would take years to build them — if they ever are, since not all homeowners would want to sell or develop their own property.

What we’re reading

USC is on a selling spree. After unloading its presidential mansion, the school is offering up another home it owns in the Hollywood Hills for $4.25 million, according to House Beautiful. Designed by Frank Lloyd Wright, the stunning abode is listed on the National Register of Historic Places.

If you’re bidding for a home, there’s an increasing chance that the other contenders aren’t trying to live there. They could be an investor, a house flipper, or even a hedge fund, according to NBC News, who reported that investment groups are scooping up homes across the country thanks to their unmatchable financial firepower.

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