According to Blumenkehl, “On the one hand, home values are determined by how much a buyer is willing to pay for a particular property. On the other hand, in order to protect their investment, lenders require the property to appraise for the purchase price in order to assure that the loan to value ratios required for the particular mortgage are maintained.”
“The result”, concludes Blumenkehl, “is that today’s seller is not only subject to competing with these foreclosures and short sales when marketing and pricing their homes, but the price the buyer is willing to pay will be subject to how much the distressed and foreclosed properties in the market will sell for.” This leads to many under-valued appraisals, Blumenkehl says, which in turn will require sellers to either further reduce their already depressed sales price or try to find a new buyer and hope the next appraisal is higher. Blumenkehl also pointed out that in many types of sales, such as FHA or VA financed transactions, the seller is stuck with the appraised value even if another buyer is willing to pay more but requires the same type financing, since the appraisals are registered with HUD for a 6 month period. Blumenkehl says his fund has opted to hold certain properties that have under-appraised and achieve high rates of return on renting the property while he waits for the market to return rather than sell at over-deflated prices.
Charles Blumenkehl, a 30+ year veteran of real estate management in New Jersey, founded Blue Asset Management LLC in 2008 to leverage what he saw as opportunities that arose as a result of the mortgage crisis leading to the foreclosure crisis. Blue Asset Management LLC is a buyer of performing and non-performing residential and commercial real estate mortgages, distressed and investment real estate in northern New Jersey. For more information about Blue Asset Management LLC log onto the company website at www.blueassetmanagementllc.com or call the company directly at 973 83-1400
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Buyer and seller of commercial and residential mortgages, distressed real estate and investment property in northern New Jersey