Do Trades Have to Appraise?
The story was stumbled across in a Google news alert. I follow Google alerts for the term "Bonita Springs" and "Bonita Springs real estate". The story is a "trading places" sort of article about a property owner in Bonita Springs that would like to purchase real estate in Ohio, but has to sell her condo in Bonita Springs, to be able to do so. The homeowner placed ads on Craigslist and DomuSwap.com with a desire to trade property with an Ohio homeowner. The Bonita Springs homeowner would like to move to the northeastern Ohio area.
The article itself is all over the blogosphere and in fact in the Cleveland Plain Dealer. The press is shouting about how many inquiries the owner has received and how they are trying to work with some of them if the replacement trade looks appealing. The home owners name was used in the article so I just thought I'd go to the public records at www.leetc.com (uh, that would be public information) and find out the scoop on this deal.
Here's the skinny: This Bonita Springs condo was purchased in December of 2005 at a price of $419,000. That '05 part might be part of why it isn't sold and being considered for a trade. This condo was purchased in the height of the Southwest Florida real estate boom, right before the marked decline of values and at the tail end of blind appraisals.
Real estate values in Bonita Springs
Recent closings in this neighborhood have closed at $151 per square foot. This "up for trade" Bonita Springs condo valued at $151 per square foot roughly comes out to about $320,000 - a discount of nearly $100,000 from its purchase price three short years ago. There are seven units of this floor plan listed for sale in the MLS right now. The most expensive is $400,000 (almost $20,000 under what the subject condo was purchased for) and the most affordable is $349,000. The most affordable is 140+ Days on Market. They aren't exactly flying off the shelves.
What is the point of talking about property value in a trade as apposed to a sale?
- The property owners will still likely have a mortgage to pay off.
- The owners can not trade it for what they paid for it in some cases, because it is no longer worth that.
- If the person that trades for it gets a mortgage it still has to appraise.
- The "traded for" property can also have equity and value challenges.
Any way you dice it, property has to appraise to get a mortgage. Although I appreciate this particular homeowners "out of the box thinking" I hope they're sitting on a pile o' cash or they put the full 20% or more down when they bought, so they have some equity to swing a deal. If they do not have enough equity to facilitate a trade at a value the condo will appraise at they will have to bring the cash difference to closing, have a short sale or just wait until the values elevate to 2005 figures. Wonder how long that will be...