With all we realtors must do in this difficult market to get a home under contract, why won't all appraisers establish full value instead of stopping at or slightly above the contract price?? All too often with transactions that the appraised sales price was obviously cut short after reaching the contract terms. I am involved with a home that the seller had paid for an appraisal 8 months, the current appraisal comes in nearly 13% lower!! Area sales actually gained 2.6% in 2007. With unforeseen problems, this "short " appraisal has given us fits as we are now locked into this value as far as the underwriter is concerned. My own CMA done prior to writing the offer was significantly greater than the now current appraisal. With underwriters on high alert for any signs of fraud or misrepresentation, appeal to reason seems to be useless. This has caused sacrifices to be made that should never have been considered. Mind you this was not some uncommon home, it is a pretty straight forward style with adequate comps. The buyer should be getting his money's worth and the people involved ought to be doing the right thing and not the easy thing. There is a bigger picture here.
I understand your frustration, the lender has the option to do an appraisal review. Your borrower has the option to go to a different lender with a different appraiser. This may be your best option. The appraisal will likely come in at contract price, not usually above. Is is below contract price? I seemed to have missed that.
If it is below contract price, pull your own comps and submit those to the appraiser. I do this often and find the realtor really knows the market better than the appraiser and may even submit listings that are close to closing as potential comps. Good Luck, find a new lender if you can!!
Ron:
In an attempt to balance avoidance of your wrath with giving my honest opinion, I make the following comments. You've answered your own question.
"With underwriters on high alert for any signs of fraud or misrepresentation", appraisers are being conservative. One of the contingencies in our Contract of Sale states "This contract is contingent on [the real property] appraising....for the sales price......" Most appraisers do not want to kill a deal. However, most appraisers aren't willing to risk their license or THEIR FREEDOM to appease a real estate agent.
Is that a reasonable frame of mind? I am not qualified to make that judgment. However, we are in an environment of overreaction. Lenders and tightening their requirements and appraisers are tightening their appraisals. Confirming the value of the home in relation to the Contract Sales Price cannot be considered a wrong thing. It might be conservative. However, I can't condemn an appraiser for being conservative in this current climate. Especially, if the appraisal supports the contractual sales price.
Remember..........APPRAISED VALUE does not necessarily equate to MARKET VALUE.
That's just my $.02.
Ron,
My comments are not going to be popular, however I am trying to be honest and helpful. The underwriter wanted an appraisal from an independant, unbiased party that is bound by Uniform Standards of Professional Appraisal Practice (USPAP.) One who have had extensive state sanctioned training in valuation principles.
If you want to find a lender that will lend on a BPO, you are welcome to send the borrower and provide what you think the property is worth. Your statistic of area sales increasing 2.6% might be misleading and does not include 2008 or break down first half of 2007 from second half of 2008.
This appraiser is a professional and I doubt he gives you selling tips.
James S. Graner
Certified Residential Real Estate Appraiser
Hello, Ron.
It is hard to determine what may have caused the changes... Was the first appraisal inflated? Has the market decreased 2% per month over the past 8 months? Were the comparable properties used in the report the best comps available in both situations? What was the condition of the subject? It sounds like your CMA came out differently. I would imagine the CMA comps differed from the appraisers. Why?
It's intriguing, but I would love to know more about the situation before I get a feel for whether this is in incompetent appraiser(s) or seller frustration.
Your post has been featured here. Thank you.
I remember the day (or maybe this was just a dream of what would have been nice) when the appraiser was not held in such high contempt and had his competence questioned so much. It seems logical to me that their is such a thing as renogiation. Maybe all parties need to go back to the bargaining table and rewrite the contract to match what the market indicates the value should be. This is what got us into the problem we are in now. The appraiser is being put under so much pressure to "make the deal work". What if the value is not really there and he goes ahead and changes the value, or what if they find another appraiser to hit the value, then 6 months later the person has to move but they can't sell the house for "what its worth" (determined by the last appraisal), then the owner gets really ticked because they were told it was worth what they paid. I'm sorry but I have to question the position of a person in the transaction that is getting paid on full commission (based on what the sales price is) rather that the poor sap that is getting paid a flat fee of $300-$400. Come on, do you realy think we want to kill a deal? Believe me, its much easier on an appraiser if its a nice clean appraisal assignment and the value comes in fine. Sorry for the ranting but I had to get this off my chest.
Sure is easier when the appraisal matches the sales contract, however sometimes this just is not reality. Nothing is worse on an appraiser than to hear yacking from the Mortgage Originator that gave him or her the deal, at least two Real Estate Agents, a borrower and a seller. Then to revise the report to reflect a new sales price.
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