It is an all too often situation now days – low appraisals. The buyers want the house but they can’t buy it for the agreed price and in the case of an FHA buyer it can’t be sold to another buyer using FHA financing for four months.
With regard to one transaction that did close; I had an exhaustive email exchange with the Director of Underwriting at HUD Region VIII in Denver early this year. I was complaining that an appraiser was not prudent in her selection of comparable properties and she would not consider other comparables beyond the scope of the lender requirements. This lead me to a conversation with a Vice President at the Credit Union that the buyer was using. The lender requirements these days for both Conventional and FHA loans are in this order: 1) ½ - 1-mile radius, 2) Date sold, 3) Original age, 4) Size of home. Lenders require that two of the comparables be sold within 60 days and the third comparable within 6 months but as recent as possible. In one of my transactions, despite the extensive remodeling, the appraiser was steadfast in her opinion of value almost 7% lower than the agreed price. The worst of it is that Mortgagee Letter 2009-30 virtually stigmatizes properties for four months in an effort to eliminate appraisal shopping.
Consumers have held appraisers in high regard; higher regard than a professional real estate agent or broker. It’s time we learn how appraisers choose comparables and learn to articulate that to our sellers so they don’t get caught between a rock and a hard place. Instead of taking printed comparables and a fancy analysis generated from a software program, consider inviting them to your office where you can pick the comparables, in the same fashion as an appraiser has too, right in front of them – live. When they have a stake in how those comparables were chosen they might understand a lower price better.
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