When to Reappraise a Home in a Flooded Neighborhood

Flooded homes in BellevueI must admit that this is the first time I have fielded an emailed question having to do with such a widespread natural disaster. The question is a very good one and I thought it best to share the conversation on my blog as many of you in Nashville may be experiencing the same situation. I have changed the name of the actual customer with a fictional name in order to protect their identity.

Kim: I live in the Riverwalk subdivision in Bellevue. My home was NOT flooded. We currently have a 7 year fixed-rate mortgage that changes to an ARM in 2 years. We have been looking at refinance options recently, but it seemed like the appraisal would not be good compared to the original value of home. We have a 100% loan, so this is an issue. We had planned on waiting another year for the market to improve until this weekend’s flood. Not at all sure what to do now after all the flooding here. Do I rush for appraisal/refinance before impact hits or wait it out and see? Again, the ARM does not kick in until May 2012. Do you have any input here?

Grant: I am sorry to hear that Riverwalk has been hit as hard as it has. Could you estimate how many or what percentage of homes in Riverwalk have been affected by the water? At this point, I think that you have to wait since insurance adjusters are already here and readjusting values. Although, it would probably be best to talk with a local appraiser who is actively doing refinance appraisals. Have you ever spoken with Bill Cary? He and his father are local appraisers who usually have very up to date information.

Kim: About 150, or about 1 in 4 homes flooded in Riverwalk. Boone Trace had an equivalent number and pretty much all of Beautiful Valley flooded. No homes in Lexington Point did. These are the 4 subdivisions off Newsom Station at McCrory Lane. Thanks for responding and I will check with local appraisers such as one you mentioned.

Grant: I spoke with Bill Cary this afternoon and he recommended either doing the appraisal now rather than waiting the full 2 years. He argued that appraisers would only be allowed to use the most recent comps in determining the value and fears that the prices will begin to come down because of the flooding. However, Bill also pointed out that appraisers typically do not use distressed sales when comping a property for value purposes, but he also admitted that each appraiser takes into account slightly different factors than another. He fears, as I do, that the natural human reaction to driving into a devastated neighborhood would subconsciously cause an appraiser to simply err on the conservative side. I do think that it’s possible for Riverwalk, Boone Trace and Beautiful Valley to fully reconstruct within the next 24 months, but I’m not sure that people will want to do so. If you were moving to Nashville, would you buy a home in a neighborhood that was so recently flooded? I don’t believe that most people would knowingly do so. That is, until more time goes by.

Nashville Flood Assistance

Those who suffered losses may apply for assistance online at www.fema.gov or over the phone by calling 800-621-3362. Those who wish to volunteer or donate may visit Hands On Nashville at www.hon.org or the Community Foundation of Middle Tennessee at www.cfmt.org.