Are appraisals really objective?

OK, to all my Realtor friends out there that title may bring a chuckle. Unfortunately the public and most underwriters see appraisal results as set in stone.

I'm writing this post because I'm seeing appraisals come in all across the spectrum of value. Not that we didn't have appraisal issues before but now, the law meant to protect the public is actually hurting them. As a Realtor and a licensee in the state of Maryland I'm required to be familiar with the market area I'm listing and selling in. Although I've heard from appraisers that they are also I'm not finding that to be true in practice. Any experienced agent knows the same house in a different neighborhood may be valued differently. This could be because of highway access, road noise, proximity to public transportation or numerous other factors. Of course one would assume an appraiser could look at the area and also make that determination. Unfortunately that doesn't seem to be happening in the real world.

What about distressed properties? I have a listing under contract and on the way to settlement that is the highest sale in the past six months in the subdivision. During that time a number of short sales and foreclosures have sold for well below market. The story turns out well because we got a local appraiser who was wise enough to go outside the subdivision to comp to similar properties that were not distressed. My listing appraised for the full contract price so this story ends well. However I hear horror stories for my fellow agents on almost a daily basis that an appraiser came from two hours away, sent by a management company and came in dramatically under market simply because they didn't know the area and compared a traditional sale to the short sale across the street. In this market that can mean the difference between the seller being able to complete a sale or being forced into a short sale situation or even a foreclosure down the road.

So back to my title, are appraisals really objective? I have actually been told by an appraiser in a CE class that they are. I didn't check his bio to see what planet he was from but I think anyone who has been in this business for more than one transaction knows better. I know many fine appraisers who are diligent and take the time to consider all factors in establishing value. Unfortunately with prices being driven down for appraisals by management companies some (to all you offended appraisers please note I said some) appraisers are cutting corners just to make enough to survive.

I think the answer to the problem lies with a little used resource of late called reason. Legislators, if you must make a law to fix something try tweeking what is in place to make it better. What we see going on now is similar to knocking the house down to change the paint color. To cite an idea I've used before in my blogs, laws made in the heat of passion and in response to an outcry are never good. I suppose I could expand that to deal with a lot that's going on in America today but that's for another blog.