Sunday, January 3, 2010

Having Problems With Your Appraisals?

This is a pretty good article explaining how appraisals are killing more deals in today's real estate market. It's not the appraiser's fault...every time. And yes, listing agents will resort to begging in order to get their listing sold. Something we shouldn't be proud of but it happens all the same.

Consider an example where a home has been listed for 280 days and they finally get the home under contract. Until the appraisal comes in at $50,000 below the agreed contract price. If the seller doesn't drop the price by $50,000 then the buyer must come up with the $50,000 difference or else the deal falls apart. Guess what happens 98% of the time? The deal falls apart. It's heartbreaking for both buyer and seller and the lender. But how do we know if the appraiser really knows what they're doing? They're human and can make mistakes, right?

Fortunately, I have not had any appraisal problems but I have certainly had a few appraisers call me and ask for extra comparables. But the article points out a big problem and that is the lender will sometimes hire an appraiser not familiar with the area in which the subject property is located. Appraisers are similar to real estate agents in that both tend to have areas of focus. Most Dallas agents can't speak elementary about Ft. Worth real estate and vice versa. So then why is an appraiser any different? Yet Ft. Worth appraisers appraise Dallas real estate all the time. And there are many disagreements.

It's also odd that an appraiser will ask for a copy of the contract and, therefore, see the agreed sales price, before they've stepped foot in the property? Isn't this like cheating? I've never understood this practice. Aren't appraisals supposed to be unbiased reports? Wouldn't seeing the sales price before seeing the property make the report biased?

Whatever. My buyers get good deals and don't have appraisal issues and neither do my sellers. I guess that means I'm doing something right.

1 comment:

  1. I found your article by a Google Alert on "appraisal". We're definitely in different locations, but I read your post and figured I'd leave a comment.

    Regarding purchase contracts, Fannie Mae requires the appraiser to analyze the purchase contract and report on the information provided in the contract. Therefore the appraiser must ask. Seeing the contract beforehand would only be cheating if the appraiser was intent to "meet the sales price".