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Is it just me or are the appraisals coming in low?

By
Real Estate Agent with Sandpoint Realty rain@lakeandhomes.com AB36782

Is it just me or are the appraisals coming in low? That has been the million dollar question lately.  I had 4 homes that I had to challenge the appraisals lately.  One of them I thought was a stretch, but when we have 3 buyers wanting it at that price, it usually means we were in the ball park.  The rest all came in well within the fair market price range.

For years and years appraisers were not supposed to know the price of the offer.  In fact I can remember a time when it was a big no no for an agent to slip up and disclose the price for fear of altering the opinion to get it to come in high enough.  The whole idea of an appraisal was to determine the value of the home.  Then we went through the stage where appraisers knew the price and hit the mark almost every time.  All of these appraisals lately have had a copy of the contract.  Ironically lately the appraisals ordered by the bank have come in right around the loan amount, and no where near the purchase price. 

One of these homes had a $175k offer, fantastic inspection, buyers who loved it, everyone was packed and moving.  All was going smooth until the appraisal came in $21000 to low at $154,000 and a cost approach at $189,000

 

While I was certainly unhappy, this isn't just sour grapes.  The buyers had been looking for a long time, they knew the value of homes in this area very well.  All of the comps were 182k and above for similiar homes and homes that should have been less in value.  We had a recent appraisal of $189k 2 months before. The  There were fourteen recent like and kind sold comps.  2 homes that were less because one was bank owned and the other was structurally deficient and missing a legal septic and well and had been on the market for 7 years.  I will give you 2 guesses at what comps made the list first.  I am no stranger to  taking the facts to an appraiser and stating my case, but this time they would not budge. The buyer wanted to pay another appraiser to see what they would come up with, but the bank would not take the appraisal.  In the end our only choice was to reduce the price or start all over with a new lender. 

An appraisal should determine the value of a home to protect a buyer from not knowing any better and over paying.  It is part of our fidiuary duty to protect our clients and so I am not debunking appraisals.  I have known some appraisers that take their jobs very seriously and keep in mind that there are people that it will affect.  Most have taken the attitude that if I could proove my case they would adjust their opinion.  I fully understand that sometimes they are dealing with the comparison of apples to oranges, with a lack of data to support anything.  I am however concerned that when presented with justification of a value, none of the facts that should be taken into account was.  That a lender was unwilling to entertain a third party appraisal value that was higher.  In a case like this if the price is lowered then it will throw the values off for every house that is like it for at least the next 6 months.  This in short is a manipulaton of the market values.

This worked out in the end, but it casts a shadow on what direction we are turning in the world of appraisals.  Like anything in a world of comparison and a range of facts and figures there is a certain degree of opinion and perception.  In the end it is not the stats that matter as much as how it effects the people involved.   

 

 

Posted by

Rain Silverhawk

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rain@lakeandhomes.com
Rain Silverhawk Realtor
Sandpoint Realty LLC
1205 Hwy 2 STE 203 B |  Sandpoint, ID. 83864
Phone (208)  610-0011  

 

Comments (2)

Chris Griffith
Downing-Frye Realty, Bonita Springs, FL - Bonita Springs, FL
Bonita Springs Listing Specialist - Agent

My last few appraisals have come in exactly at contract price. I had one come in low but it was expected.  The buyer is bringing the difference to the table, cash.

Jun 30, 2014 07:56 PM
Mark Don McInnes, Sandpoint-Idaho
Sandpoint Realty LLC - Sandpoint, ID
North Idaho Real Estate - 208-255.6227

Difficult situation for you Rain.  We want the appraisal to come in at price obviously and when we see such a large discreption it is hard to understand.  I believe we are seeing it in many different areas of our field right now.  Not just the appraisals.  It seems to be leaving us all shaking our heads in disbelief.

Jul 01, 2014 04:19 AM