Appraisal Accuracy Can Be A Roller Coaster Ride

Good morning George Souto ,

Bingo!! Appraisers familiar with an area are best suited to prepare this report and should be a requirement! I just had an appraisal come in at the 11th hour low on a condo in an appraising area..he was not from the area and didn't understand the community. Thankfully I and the sellers agent were all over it and able to facilitate a win/win for both parties and we are still closing on time!

It's important to have regulations that keep people honest. Thanks, George.

Good morning George.  I think if we could have an easier way to contest bad appraisals, it would help everyone.

George, all of us in real estate long for the appraisers that know the area...I have calls constantly from appraisers who are looking for more detail on a property I sold to help with their appraisal...

This change in the Appraisal Rules would be a welcomed 'First Step', George Souto . There are several others I can also add to the needed change.

For the most part, my experience with appraisers has been good.  But, those that weren't were often nightmares!  Especially those who come into our area from somewhere else, and seemed to have little knowledge of values here.

CONGRATULATIONS George, on having this blog FEATURED in the Old Farts Club group!    

Good Morning George - I have heard many stories about problems with appraisals.  Coming back to balanced rather than swinging to each extreme would be welcome.

especially when appraisers are sending out assistants to do the appraisals George Souto instead of going out themselves

That's a good way to put it, George--a roller coaster ride. I have a listing that I sold at $335,000 and it appraised at $330,000. Another agent had the exact same home for sale at $335,000 and the appraiser sent for that contract appraised it at $315,000!

Hi George - We have experienced few problems with appraisals in the last couple of years, which is interesting, since our hot market is sending prices up very quickly. But if there is a problem, it's likely an out-of-area appraiser.

Hi George, this has been a challenge for as for a long time, I've had appraisers drive four hours to appraise a house, needless to say, they didn't work out too well. Like real estate agents, appraisers should have the local market knowledge.

A major issue that has been left out of this thread is that many lenders are using Appraisal Management Companies.  Many of the Large lenders use AMC's that are in part by the lender.  It has created an additional income stream for them.  From there these AMC's tend to blast out an email to as may appraisers that cover the subjects area with a low fee.  If your borrower is being charged $600 they will blast out the order for $300 with a 48 hr turn time.  The 1st appraiser accepting it gets the order.  There is no checking to see if the appraiser is actually knowledgeable in the subjects market.  If no one takes the job they will raise the fee $25 and resend it out.  The AMC is interested in keeping as much of the fee as they can.  One of the reasons that many of these lenders are saying that there is an appraiser shortage is because many of us will not work for these low fees (especially when you consider how much work is involved as they will send out 10 pages of requirements/exhibits/etc they require for their reports.  I do very little lending work and the few that I do are for the upper end of the banks (CitiBank Private, etc..).  The high end banks do not have the 10 page requirements or the fast turn times.  

As for the comment about trainees being used, yup, seen and heard that, but the lenders are pushing for that to be acceptable.  

Excellent post!  I have had deals fall apart over inaccurate appraisals and it is beyond frustrating.  I had one home under contract that appraised at 217k but purchase price was higher and the deal fell apart.  1 month later same house goes under contract at 217k and appraisal came in at 186k.  Ugg!!!  Roller Coaster Ride for sure

The changes created by HVCC have had a negative impact on appraisals for sure.

Also, a part of this is the appraiser's fees have been reduced and I think that impacts the amount of time they are willing to spend on the job.

The ability to contest a low appraisal is difficult. When you can get a lender to order another appraisal, they use the same appraiser. How often is that appraiser going to come back and say they were wrong?

I wonder how values by appraisers would track if they were not allowed to see the purchase contracts? Probably a wider range yoyo effect. But the first thing an appraiser would do would be to check the list price in the MLS. It does help to have a target

George Souto - Thanks for your insights on a very messy problem with appraisers. I am curious if you or Anthony Vosilla has any additional information about the appraisal process by Chase Bank?

George

All so true!! I've been fortunate and have not had any issues with appraisals in recent years but know many who have. Appraisers out of the area are a big problem.

Jeff

I would say it was well needed too! The industry always has one not being so honest and the more regulated it is, it should be more accurate.

Lauren Selinsky

(gabe re-blog)

Many appraisers will balk at this  move, but it is a necessary one as I have seen the results of appraisals completed by 'out-of-the-area' appraisers and it ain't pretty!