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Estimated Declining Appraisals

By
Real Estate Agent with Esslinger Wooten Maxwell, Inc.

This week in our sales meeting some agents complained about having problems with appraisals coming in low, even after they based their asking price on a recent CMA; priced the property agressively and the buyers still reduced the sale price further.  

That was when we were alerted to the fact that appraisers were using 90 days old comps. However in some areas and some types of properties are selling at one or two homes per year. So for those comps that are over 90 days old, appraisers estimate 1% per month decline in value.

Many of us find this trend curious, because when the market was increasing at 2-4% and we would try to get appraisers to adjust for the increase in value, they would tell us that it was against lending rules. They would say that the appraisal had to be based strictly on closed sales.

Has anyone come across this trend in other markets? Are there some appraisers or mortgage brokers who can shed some light on this trend?

Comments (3)

Karen Riede
Realty Executives Chattanooga - Chattanooga, TN
I have heard of the same problem in my area (Chattanooga, TN). A fellow agent in my office had a home that was purchased as a foreclosure and completely redone on the inside. Everything was replaced and it made the home "like new". Many of the other homes in the neighborhood were being purchased as foreclosures as well, but not updated. When she had a ready, willing and able buyer the appraisal came in 10k under the sales price. She has argued with the appraiser - and even provided current comps showing recent sales prices and condition and the value was clearly present in the home she had a contract on. The final appraisal hasn't come in yet, but believe me if it's not at the sales price she will have a fight on her hands!
Mar 07, 2008 07:46 AM
Peter Tamura
Coldwell Banker Select - Tulsa, OK
BANNOCHIE TEAM

Appraisers are factoring in a 1%/month decline in value for neighborhoods with few comps?  That is rough...are there a lot of listings in these neighborhoods and few sales?  If there is low turnover in a neighborhood, I would consider that to be a stable neighborhood.  If, however, every fourth house is for sale and there are no closed transactions, that would indicate that prices have further to fall. 

I think appraisers should be treated as independent entities and we shouldn't negotiate what is reasonable, I would just hope that they use sound judgement.  Impeding transactions from happening reduces liquidity in the market, to restore a stable market, the foreclosures and short sales have to work their way out of the system, I think the quicker we do that, the better.

Our neighborhoods in Tulsa County, we haven't encountered that.  What we do encounter is a lot of underwriters holding things up at the last moment and scrutinizing.  I wish they wouldn't do these things the day before close, it's very inconsiderate of the buyers and sellers.

Mar 07, 2008 07:54 AM
Matthew Heavener
ERA Heavener Realty Co. - Jacksonville, FL
This is news to me, but good information none the less.  I am still trying to figure out what all the implications of being a "declining market" entail.
Mar 07, 2008 07:56 AM