Modern Real Estate: Too Alluring to Fail? - Page 5

Values of modern homes fell with the housing crash—but their appeal still stands strong

One major hindrance for sellers and buyers of architecturally distinctive properties are new restrictions that make it harder to up the appraised value of the home based on its architectural qualities.

This change, the Home Valuation Code of Conduct, mandated by the Federal Housing Finance Agency for loans that are sold to Fannie Mae and Freddie Mac, was intended to eliminate appraisals based more on fantasy than market value. But it's had the unintended consequence, many agents complain, of scotching deals when both seller and buyer agree on the price of a home but the bank won't lend the full amount because the appraisal, based on conventional data, comes in low.

"Many appraisers do not know or understand the mid-century, California-modern style of home," Benson says. "Many homes sales have fallen out several times based on the comparison of these homes to ranch-style properties in the same neighborhoods."

"Banks have a responsibility to protect their investment so they have a consistent perspective of being on the conservative side," says James Ebert, a Los Angeles appraiser. "They tend to want to look at [a home] as sticks and mortar, as shelter. Banks don't lend money to buy pieces of art, because art is a very subjective thing."

Buyers and sellers can deal with low appraisals in several ways—besides lowering the price of the home. "We can always work around them with bigger down payments," says Peninsula agent Glenn Sennett. And Ebert has used his knowledge of modern architecture to help convince banks that the quality of the home should figure into its appraisal.

Taking action to lock in the value of your home

No prayer, no imprecation, no potion can help the individual homeowner control the gyrations of the real estate market. But there is plenty that can be done to help homes increase in value, both short-term and long-term, whether owners plan to sell soon or to hold tight.

visits neighbor

Both before and during the downturn, agents say, well-maintained homes that preserve the original architecture, or show artful, sensitive, reinterpretations, do best in the market. "Good taste always wins with an Eichler," says Catherine Munson, a real estate broker in Marin. "But it's got to be good; it can't be hokey."

Plan to sell? The market is saturated with foreclosed properties, many in bad shape. Don't add to the glut. "The appraisers don't want to see peeling paint," says Heidi Slocomb, the Walnut Creek broker. "They want the wood in good condition. They don't want to see a leaking roof."

There is evidence that historic designation helps boost and retain housing values, according to a study, 'Historic Designation and Residential Property Values,' by a trio of University of San Diego professors, Andrew Narwold, Jonathan Sandy, and Charles Tu, who studied homes in historic districts that took advantage of California's Mills Act tax relief provisions. The study suggested that "historic designation results in a 16 percent increase in housing value."

This study was done, however, before recent rules were imposed making it difficult to base appraisals on historical or architectural factors.

It's also clear that an organized neighborhood, focused on keeping property maintained, can be a boon. "If a neighborhood maintains its integrity as a group, it adds value to the individual homes if the whole neighborhood looks good," says Slocomb, "because people are choosing a neighborhood as well as a home."

Nowhere is this better seen than in Sacramento's River City Commons. There, home values dropped precipitously—but to a lesser extent than nearby neighborhoods that lack River City's active homeowner association, which enforces rules about architectural preservation and general upkeep.

Rather than moan about foreclosures, the River City association has moved aggressively, leaning on banks to cut lawns and repair abandoned properties.

sisters moving

Neighbors themselves pitch in to preserve their neighborhood's looks, even during the current crisis. Nick and Amy Correale, who have lived in River City for two decades, often pick up trash that blows into their neighborhood from the park across the street. They also volunteer, along with other people from River City, at the park, tending the rose garden or maintaining the new Fort Natomas playground.

When the house next door to his went vacant, growing weedy with lack of maintenance, Nick took it upon himself to weed and water. He assumes the home is in foreclosure. "I've been maintaining the front yard because everything started dying," he says. "I care about our neighborhood."