Special offer

Appraisals Take Center Stage in More Deals

By
Real Estate Agent with Sonoran Fine Properties

 

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

 

Appraisals continue to hamper deals. In the first six months of the year, one-third of real estate professionals say appraisals have caused a delay or canceling of contracts — that’s up from 29 percent for all of last year, the National Association of REALTORS® reports.

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)

Comments (11)

Robert L. Brown
www.mrbrownsellsgr.com - Grand Rapids, MI
Grand Rapids Real Estate Bellabay Realty, West Mic

They are in control and they know it. Out of the last ten deals I've done 8 have been cash deals. No appraisalissues.

Nov 07, 2011 10:37 AM
Mark Towler
Southeast Mortgage - Atlanta, GA

I find appraisers are afraid/skittish and don't want deals gone bad traced back to them. Dodd-Frank/HVCC are very hurtful to our housing market.

Mark Towler

 

Nov 07, 2011 10:50 AM
Terrie Leighton
Ferrari-Lund Real Estate - Reno, NV
Reno Real Estate Agent ~ Selling Homes in Reno

We all hold out breath until the appraisals comes back! Strangely, recently  in my area we have seen appraisals coming in higher than list price.  I am not sure what is going on but I am not going to question it either. I was hoping this was a good sign for the housing market across the country but perhaps Northern Nevada has just been lucky!

Nov 07, 2011 11:19 AM
Hella Mitschke Rothwell
(831) 626-4000 - Honolulu, HI
Hawaii & California Real Estate Broker

Dale and Candice: I just got some quotes from two appraisers on a home and when they found out it was for a private party and not a lender, the fee was cut by quite a bit. Makes me believe that the appraisal will come back HIGH compared to what they would quote a lender for the same home. Still, we decided to price the home based on this appraisal in the hope that when it sells, it will be close.

Nov 07, 2011 11:26 AM
Michelle Francis
Tim Francis Realty LLC - Atlanta, GA
Realtor, Buckhead Atlanta Homes for Sale & Lease

Dale & Candice, 

Just saw a bad appraisal too!  It's going to continue to be very challenging to get a mortgage or refinance which is a fundamental issue with our market recovery.

All the best, Michelle

Nov 07, 2011 11:55 AM
Joy Daniels
Joy Daniels Real Estate Group, Ltd. - Harrisburg, PA

The sad part is I can't defend my listing to an appraiser anymore - they won't talk to agents.  It is a tough market and we need to learn to roll with it - good idea from Hella!

Nov 07, 2011 11:59 AM
Patricia Kennedy
RLAH@Properties - Washington, DC
Home in the Capital

I think a lot of the problem is the appraisal management services that the big lenders usually use - they don't pay their appraisers and can only attract sub-prime employees. 

Nov 07, 2011 12:01 PM
Robert Hammerstein -
Christie's International Real Estate - Hillsdale, NJ
Bergen County NJ Real Estate

Well suppose we all have to go with what the trends are at any given moment in time and it always turns around.  Great post!

Nov 07, 2011 01:16 PM
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

They have just changed all the appraisal rules again.  I hope this doesn't cause their to be more uncertainty in the market.

Nov 07, 2011 01:23 PM
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

One of the ways we can help is by describing the property by mentioning all the upgrades , When they pull up comps for solds and pending they can then know how to base the value if they can read a good description of those homes and compare with subject.

Nov 07, 2011 10:15 PM
Charlie Dresen
The Group, Inc - Steamboat Springs, CO
Steamboat Springs, CO e-Pro

We have definitely seen appraisals affected by the appraisors needing more comp data and in the process collecting comp numbers on foreclosures and short sales. It's certainly had an impact in the psyche of buyers and sellers "holding their breath" for yet another milestone to be passed on the way to closing...it's hard to be confident when you're not sure what the appraisor will allow/consider as part of his decision set. And the fact that there can be tens of thousands of dollars difference in one appraisors value vs. another adds to the frustration factor.

Nov 07, 2011 11:13 PM