Back in the day of skyrocketing home sale prices between 2001 – 2006 the appraisal of a home you’re buying
(or selling) was of very little concern to buyers, Realtors, lenders etc because it almost seemed as though appraisers were asking the lenders “what do you need it to appraise for?” before doing the appraisal…no accusations here, but there was some funny business going on and it was one of many factors that encouraged the housing bubble to burst. Since then appraisers have completely reversed course and potentially to the detriment of the market.
We often mention appraisal issues here and even mentioned this particular appraisal issue back in June 2008; we’ve also wondered to ourselves if this will become such a problem that when the housing market begins to recover if appraisals will keep it down. Well, we’re not the only ones wondering or talking about it any longer, seems the media at large is catching on. An article today on Bloomberg.com specifically lays out the issues we’re seeing, specifically that appraisals are begining to kill more and more deals. What happens is the buyer agrees to pay say $350,000 for a home, the appraisal comes in at $325,000 and the lender then refuses to lend on the home –> dead deal.
After getting their hands slapped for inflated appraisals in years gone, appraisers have done a 180 now often being downright harsh on their appraisals in some cases causing everyone, the buyer, the seller, the Realtors and the lender to all be on the edge of their seat sweating waiting for the results of the appraisal to see if we really have a deal or not.
Now of course appraisers should be independant and come up with their own values, however it seems like they are being overly cautious especially when you see a home that has multiple offers on it that doesn’t appraise at even the level of 2 of the top offers as cited in the bloomberg article; that’s going a bit far. Housing is like any other commodity, what a buyer is willing to pay for a home is what that home is worth and some appraisals are beginning to stand in the way of that market. So should it be appraisers dictating housing prices or should it be the market and buyers and sellers dictating housing prices? We of course encourage appraisers to do the job to the best of their ability and independent of other influences including lenders & government and to be pro-active in their approach rather than re-active.
~Scott McDonald, you’re Portland Oregon Real Estate Agent
Tags: appraisals, real estate market