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Th e M Rep o RT | 29 O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t ORIGINATION the latest ORIGINATION Fewer Homes going to all- cash, institutional Buyers With these two groups dialing down market participation, can traditional buyers pick up the slack? a ll-cash buyers and institutional investors accounted for a declining share of home sales in the third quarter, putting a bigger burden on traditional mortgaged buyers to carry the housing recovery forward. In a report released last month, real estate data firm RealtyTrac re- vealed 33.9 percent of single-family home and condo sales last quarter were transacted in cash, down from 36.9 percent in the second quarter and flat from last year. Meanwhile, sales made to insti- tutional investors—defined by the firm as entities that purchase at least 10 properties in a year—made up 4.3 percent of all single-family and condo sales, sinking to nearly a four-year low. Institutional investors accounted for 5 percent of sales in Q2 and 5.3 percent of sales a year ago. While the decline in both categories leaves more room for buyers who require mortgage fi- nancing, analysts at RealtyTrac say all-cash and institutional buyers are still an important piece of the real estate puzzle as they continue to help drive up home prices from their trough in 2012. "As institutional investors and other cash buyers slow down their purchasing in many markets across the country, more tradi- tional buyers—including first- time homebuyers and move-up buyers—will need to increasingly fill in the missing puzzle pieces to maintain the momentum of the housing recovery," said Daren Blomquist, VP at RealtyTrac. According to the company, cash sales were up from last year in 22 states, including Texas, where they comprised 32.4 percent of all sales compared to 21.5 per- cent in Q 3 2013; Indiana (31.1 percent compared to 21.7 per- cent); Massachusetts (30.7 percent compared to 24 percent); and Connecticut (36.9 percent com- pared to 31.8 percent). RealtyTrac also found that cash sales last quarter were concentrated at the lowest and highest extremes of the housing market, accounting for 64 percent of home purchases under $100,000 and 41 percent of purchases above $2 million. Cash sales also represented a large share of distressed sales, mak- ing up 54.6 percent of transac- tions involving homes currently bank-owned or in the process of foreclosure. For institutional investors, RealtyTrac reports sales share rose in eight states in Q 3 2014 compared to Q 3 2013, including Iowa (8.4 percent compared to 3.6 percent last year), Ohio (5.9 percent compared to 4.1 percent), Maryland (4.4 percent compared to 3.5 percent), and Florida (7.2 percent compared to 6.4 percent). As for property types, the company said institutional buyers are sticking to the lower tiers of the market. "Institutional investors are still actively purchasing single- family rentals, but continue to gravitate toward markets where lower-end inventory is still avail- able," Blomquist said. report: 17% of appraisals come in Under contract Price errors can result in long delays, with all involved in the transaction losing money. c lose to one out of every five appraisals on home purchase transactions come up short of the home's contract price, according to a new study. Platinum Data Solutions, a collateral valuation technology provider, found more than 17 percent of appraisals on purchase transactions claim a value less than that of the contract price. Platinum Data CEO Phil Huff said the findings point to two possibilities. "[I]t could mean that buyers are paying more than a prop- erty is actually worth, possibly because the market is starting to stabilize," he said. "On the other hand, it could indicate that appraisers are being more conservative in valuing proper- ties, which—given the regula- tions they're facing—would be understandable." Whatever the cause, returned appraisals can be a burden for both lenders and appraisers, who are forced to correct or clarify errors in their reports. Platinum Data says the process involved can cause long delays and reduce profitability for everyone involved. "Lenders and investors would be wise to keep their eyes on trends like this," Huff said. "If frequent lower appraised values are reflective of a stabilizing or declining market that could pres- ent a major impediment to the quality of loans they're transact- ing, selling, and buying." Platinum Data's findings are based on data collected from FreeAppraisalReview.com, the company's Web-based appraisal quality technology.