I was reading this article this morning and it really hit home with how my year has been going. The biggest culprit seems to be Fannie Mae. Almost all of their listings are overpriced. One of my current transactions was listed at $155,000 and my clients have lost out on so many deals lately they went full price and got under contract. We knew it was overpriced, but we were shocked when the appraisal came in at $135,000. Luckily my clients were able to get the home at $140,000.
It is just one story after another and then it hit home when we decided to refinance our home AGAIN. I ran comps for the lender and thought it would appraise between $450,000 and $470,000. The appraiser came to our home and he had only been doing appraisals for six months. A week or so later $406,000. I couldn't believe it and was not going to continue with the refinancing. Our lender was able to move the loan and get a new appraisal. This one came in at $460,000. Exactly in the middle of my projection.
Finally, one other major appraisal obstacle this year, as in years past, is the buy and flip. There have been some great remodels for sale in the Phoenix market this year, but most appraisers are a loss on assessing value for upgrades. The current solution is to pay the difference between appraised value and the purchase price; not purchase a flip and do the work yourself after close or luck out and fine an upgraded home that doesn't have multiple bids on it.
There is currently no end of site, just more stories.
Blog by: Dale
Lenders are requiring more thorough appraisals, which appraisers are saying requires them to pull more comparable sales, which sometimes may include foreclosures or short sales that sell at discounted prices. Appraisers used to cite about three recently sold homes but now lenders require two to three times that, David Stevens, president of the Mortgage Bankers Association told SmartMoney.
When the appraisals come in lower then the accepted offer — which more frequently is what is occurring — the seller either has to lower their price or the buyer has to pay the difference. From the three months ending September, 13 percent of real estate professionals say contracts were renegotiated to a lower sales price due to a low appraisal, according to NAR data.
Housing experts recommend that buyers add a statement in their contracts that says they’ll receive their initial down payment back if financing doesn’t come through the agreed price or the appraised value is below the offer in the contract, according to the SmartMoney article.
Source: “How Appraisals Are Derailing Home Sales,” SmartMoney (Nov. 4, 2011)
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