1310 Minnesota #206
It was on the market for a month before being reduced $30,000. And yet according to the listing, it’s now priced at “30K under Market Value!!” We’re still scratching our heads. And wondering when the market stopped determining “Market Value.”
∙ Listing: 1310 Minnesota Street #206 (1/2) – $609,000 [MLS]
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Comments from Plugged-In Readers

  1. Posted by anon22

    Isn’t this another way of saying, “It ain’t gonna appraise!”

  2. Posted by ButItComps!

    I’m guessing that it would appraise for $639,000 based on past sales/comps – what the agent is promoting as “market value” – while the actual market value is less as indicated by the fact that it didn’t sell at that price. Looks like another sign of a declining market.
    Another great line from the listing: “Can also return purchase price to regular market value seller to buy down rate to 5% interest rate finnancing with pre selected lender and 2 years free HOA, ask agent for details.” Remember that the next time you’re presented with comps of past sales as proof of value.

  3. Posted by Sal

    We checked the Minnesota St condo out a few weeks ago. The place was probably about 850 sqft, if that. The listing doesn’t give a sq footage.
    Even say you’re generous and call it 900 sqft, that’s still almost $670/sqft. If you take =that= price and multiply it by the square footage for the place for sale just around the corner, 1099 23rd #21 (1880 sq ft) should be going for $1.27m.
    1099 23rd #21 is for sale for $869K, a more sober $462/sq ft, more than $200/sq ft less. Why the difference?
    Well, the original (now reduced) $639K price was probably based on 1310 Minnesota #103, now “pending,” which was also listed at $639K.
    If I were in the market for a one bedroom condo for ~ $600K, I would’ve snapped up 401 Union St #101. A nice (albeit boring) 1BR/1BA condo at Union and Kearny. Parking. Asking $595K. Great North Beach location. Sold! Don’t know what it sold for.

  4. Posted by rg

    I think that the last three comments above make a really interesting point when put together: We know that appraisals of the last few years were inflated to keep a hot market hotter. But, if recent (2004-2006) “comps” keep being used by realtors to justify what “market price” is, we’re going to stay stuck in the same cycle forever. I’ve always stayed very interested in the square footage price. Maybe it’s because I’m an architect and not only work all day with material prices per s.f., but also because I have first-hand experience with what construction ACTUALLY costs (and shouldn’t that be the real determining factor in a home’s price?). However, when I look at a poorly built, SOMA “loft” and can pretty much guess that it only took $200/s.f. to build, well, that would often mean a sales price (with profit for the developer) of only $175k – $250k. And we all know that nothing sells in SF for those prices! Therefore, sellers and realtors arbitrarily throw out “market prices” such as $609k with nothing to back it up other than “comps” or what someone COULD afford. Now we’re all seeing that 70% of SFers could only afford that with ARMs, interest only mortgages, or by spending over 50% of their incomes.

  5. Posted by Anonymous

    “We know that appraisals of the last few years were inflated to keep a hot market hotter. But, if recent (2004-2006) “comps” keep being used by realtors to justify what “market price” is, we’re going to stay stuck in the same cycle forever.”
    Hold on there a second Tex. I’m an appraiser and you are telling me that my profession is single handedly responsible for price appreciation over the 2004-2006 period? Grossly incorrect. Lowered loan underwriting standards allowed a much larger percentage of the economy to buy homes and allowed those already in the market to buy more expensive places – the increased demand pushed prices up. If cheap money and low down payments are the norm in the market at the time and a bunch of people are paying $750K for a 2 bedroom condo – well that’s the market price value at the time of that property. Appraisals are scrutinized very hard at many levels of the loan process – an appraiser cannot just fabricate that the place is worth $800K and push up the market value of a property. And do you really think appraisers are using 3 year old comps on a house or condo appraisal? Any comp over 6 months raises eyebrows, and 12 months is the complete outside of the range for 99% of these properties. Lastly, FYI – there is specific language in most appraisals that you cannot use them to market a property as most of the time they are prepared only for a lender to evaluate a loan and can only be relied upon the lending client who ordered the appraisal. So if you are listing agent or buying a house, most of the time you have no legal right to rely on an appraisal done for someone else.

  6. Posted by rg

    Anonymous @ 11:14 – FINALLY, we hear from an appraisor on this site! So, how exactly do you determine that a shack in SF is worth $700k??? As I’ve said before on this site, my stepmother is an appraisor on the east coast, and she has been shocked at how SF appraisors have come to these numbers in the last few years. Not only do realtors set prices here, which appraisors are responsible for setting sales prices in other areas (isn’t that a conflict of interest, as realtors are the one making the higher commission), but where do you pull a s.f. price of $1000 or more for a cheaply built SOMA “loft”? Where in your education did they teach you that a SF 2×4 is worth $100, while a Chicago 2×4 is only worth $20? Sal makes a great point on the drastic differences in s.f. prices. Why is there this difference? My mother and I agree that SF appraisors lost their education and their code of conduct somewhere in the bubble.
    I guess that you didn’t read the Chron. article a number of months ago that reported that over 80% of local appraisors admitted to having inflated their appraisal to match the sale price and hence allow mortgages to go through that never should have. But I guess YOU are better than that, Tex.

  7. Posted by Michael

    While the cost of a 2×4 might be similar between Chicago and San Francisco the cost to turn that raw material into a house is not. Land, labor and local fees are all significantly more expensive in SF. That’s not to say that many appraisers lost their way over the past couple of years but in the end it’s the buyers who set the market price. Appraisers and agents are simply enablers…

  8. Posted by Anonymous

    It absolutely blows me away the lack of knowledge that people have of the appraisal process. Enablers? Seriously – most appraisers are the last bastion of sanity and rationality in a transaction. Literally everyone else in the transaction wants the deal to go through: buyer, seller, real estate agents, and the loan agent. Everyone makes a lot of money if it goes through and no one makes money if it doesn’t (except for that “massive” appraisal fee). Really, let’s remember a typical house appraisal fee is $400 that has to be split between the appraiser and their company where a typical real estate commission is roughly $50,000 split four ways and typical mortgage brokerage fees are a couple thousand a deal. Who again are the enablers? Please. And as mentioned in other posts on Socketsite, if you denigrate a real estate profession here as many people do to agents and you just did to appraisers, well, it’s not really conducive to a good discussion. So I’ll pass on responding to the rest of your comments. Have fun building a house with a stack of 2×4’s from Home Depot.

  9. Posted by Michael

    Anon 11:53 – sorry, was perhaps a bit too glib with that “Appraisers and agents are simply enablers…” line. I wasn’t trying to denigrate appraisers but rather reinforce the point that it’s the buyers who bare responsibility for setting prices in the market.

  10. Posted by Anonymous

    Not a problem Michael – that comment was meant more in response to rg’s post. And by the way, the SFGate article reported that 90% of appraisers felt *pressure* to inflate their appraisals, not 90% of appraisers inflate their values.
    http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2007/03/18/BUGJDOMEQR1.DTL&type=printable
    With all those aforementioned players standing to lose a lot of money on the appraiser’s decision, pressure on appraisers is nothing new. However, fierce competition for volume among lenders has made the pressure on appraisers more intense lately. Basically, a lot of the appraisal regulations put in place from the S&L meltdown were relaxed so now you have cheerleaders for the deal (loan agents and mortgage brokers who make a big fee if the loan goes through) choosing the appraiser for the deal. This lead to more unethical appraisers getting more work as they would be chosen to do the appraisal if they had a track record of bending for the lender. So yes, some appraisers inflated values, most don’t though as they want to stay in business longer than this market cycle and don’t want to get sued for fraud. If you want to read more about the wonderful world of real estate appraisal, here’s a pretty good article outlining some of the problems with the lending regulations now (especially note the “firewall” issue I mentioned – putting a firewall/disinterested party between those with a stake in the deal going through and the appraiser).
    http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2007/04/22/REGMTPCPHT1.DTL&type=printable

  11. Posted by Crunch

    “While the cost of a 2×4 might be similar between Chicago and San Francisco the cost to turn that raw material into a house is not. Land, labor and local fees are all significantly more expensive in SF.”
    I still don’t understand how the price of the same property will increase 20% and more in one year, if the appraisal is based on these rather fixed or very slowly changing parameters?

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