Last week Crain's Detroit published a pretty important article entitled Desperately seeking comparables, which explains a lot about why sales in Detroit are not picking up quite the way one would hope. If you're an outsider to the area, you might wonder why we're not all buying in bulk, given the low listing prices. It is because when it comes to securing a loan, appraisals have this funny way of killing a deal.
A decrease in traditional sales activity plus a healthy dose of foreclosures and bank sales have led to difficulty for appraisers in finding comparable sales, which means headaches for lenders and brokers working to make deals happen. During the feeding frenzy that you might now refer to as the "housing bubble," things were out of control. One of the results of the current situation is appraisers being overcautious, meaning you can't get much of a loan. Lenders have learned a harsh lesson in over-lending, and unfortunately Detroit is still being punished for it. · Desperately seeking comparables [Crain's]