The Wisdom of D. W. Skelton, Dallas appraiser

The speaker at this week’s North Dallas MLS meeting, 3/3/09, was D. W. Skelton, one of the most respected appraisers in this area. The following are excerpts from his presentation. I hope you find the information invaluable. I have been preaching much of this in my BLOG, but wanted you to hear it from a reliable source who sees the impact every day.

“The spring market should be pretty good with buyers deciding to look and buy and also some Relocation families will be moving; however, more homes will be coming on the market within the next two months meaning more competition for sellers.

This spring it will be important to price your properties ahead of the market; look at current listings that are comparable to yours and price yours below those listings because THE MARKET IS DECLINING. If you don't sell it during this spring/summer market (March-July) you may not get as much for it for the next two to three years.

Buyers will be looking for the house they really want but one that is priced right and some will justify spending more than they want to spend for an exceptional house if they plan on living in it for several years because the market will eventually rebound.

Since there will be relocation buyers coming into the market that should help to get the local buyers back out since they will see sales picking up and won't want to miss a good house. Sellers must realize that this is a very small window of opportunity to sell so they should price their home so that it will sell and have it in the best condition possible.

New Guidelines that appraisers must use in appraising a property that goes under contract starting 4/1:

1. Appraisers are being asked by lenders to use only sales from the past three months, not six months as has been the practice. If they must use sales from 3-6 months, due to a lack of activity, they can go to Page Two of their appraisal with secondary comps. Because in many facets of the market, there have not been many sales since October of '08, this is very difficult.

2. The date of sale (within the 3-month period), then the close proximity to the house under contract (must be the closest comps even if the square footage is considerably different) It used to be that the comps had to be within about 300 sq. ft. plus or minus the sq. footage of the subject property. If the home is much bigger than others in the neighborhood it will be considered over-improved and its’ value will be modified accordingly.

3. In the jumbo arena (loans over $417,000), appraisers can only use solds documented through MLS and a matter of public record. This precludes the use of builders' homes sold directly by the builder and FSBOs (For Sale by Owners).

4. Appraisers are not required to use foreclosures as comparable sales. Foreclosures are considered "stress" sales, unless the home is in an area (primarily suburbs) where many homes in the neighborhood have been foreclosed and they are the only comparables available.

It is D. W.’s opinion that homes that have not sold by the end of Spring/Summer 2009, will decline in value over the next 18 months.

THE STATE OF LOT VALUES

D. W. Skelton does much of his appraising in the areas of Dallas where homes are purchased for lot value, by buyers who want to build their dream home, or by builders who will build a spec home or a build-to-suit for one of their clients. It takes about a year to build a spec home, and the lot will not be worth what the builder paid for it, and the numbers won’t work in a declining market to make it worth the builder’s while. Only custom build jobs should be done by builders at this time.


Because the appetite for lots by builders is declining, due to the speculative market drying up, prices for land are dropping too. Park Cities' lots are still strong except on the end areas. Univ Park 70' lots that were $1.5-1.7M are now worth $1.2-1.3M. Preston Hollow lots that were $3M per acre (estate area) are now $2.5M or lower. 100'x180' lots have dropped from $45 sq.ft. to $40 sq. ft. This has all taken place in the past 12 months and each sale is lower than the previous sale.”

Judy Switzer & Associates can help you to establish the optimal list price of your home so you are successful moving it in the Spring/Summer market. In a declining market, in addition to looking at sold data from the past three months, it is important to look at pending sales and the active listings. Take into consideration the number of pending sales and solds, at a given point in time, to determine with the present inventory, how many months it will take to sell all the homes on the market in your area. That should coincide with the continual days on market (CDOM) data available through MLS.

Visit www.JudySellsDallas.com and sign up to receive a Market Snapshot of your neighborhood!