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LOW APPRAISAL

By
Real Estate Appraiser with Highlands Ranch Appraisals, LLC CR100001997

Sometimes appraisals come out lower than the agreed selling price. It is easy to label the appraiser as conservative or not competent when this occurs, but there are some justifiable reasons these transactions end up the way they do.

 When the appraisal conclusion is lower than the sales price, the transaction may be in jeopardy. Remember the appraiser's job is not to reach a value that is desired or even needed for a transaction or loan to be completed.

The appraiser's job is to be objective, impartial and unbiased. Realistically the appraisal should be well supported within the market. "Value" is defined as the monetary relationship between properties and those who buy, sell, or use those properties. Value expresses an economic concept. So it is never a fact but always an opinion of the worth of a property at a given time.

I know many Realtors do not like it when appraisals do not come out as they expected. Appraisers are simply doing their job of being impartial.

As an Appraiser I have done a few appraisals that ended up lower than the purchase price. As many of the realtors involved were upset, the transaction still took place, just at a lower price. From my point of view it if the list price is reasonable for the market the property sells faster and with little to no issues in the opinion of value from the appraiser.

What is your point of view on this subject?

Comments(2)

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Craig Chapman
Call Realty / Access Appraisals - Mesa, AZ
The Value Guy

Appraisers are supposed to be an unbias "check" in the transaction, to protect the public from over zealous sales people, wheather they be real estate agents hungary for a commission, or loan agents after the next loan commission.  I'm not saying that the sales people would intentionally mislead people about the values of a property they were buying or trying to refi, but neigher group is sufficiently trained in valuation to typically be accurate at it. How each sales person handles their fiduciary duty to look out after their clients best interest is a subjective subject that appears to vary from person to person.  But appraisers are supposed to be removed from the potential bias that may exist.

Occasionally, I too have seen a deal that was unsupportable.  Those are the appraisals we spend extra time on, to make sure we are not missing something, or at least that is what I do.  

You are right about the list price.  As evidence of this, look at listings that are over priced & how long they tend to stay on the market. Then look at the ones that appear to have been priced right & short they were on the market.  Look at ones that were over priced for a long time & then had a price reduction to a correct market price that got offers quickly after. Price is in my mind the #1 factor in selling a property & in getting the best price. If a property is priced right, it practically sells its self.  

Feb 27, 2011 10:10 AM
Danell Estrada
Highlands Ranch Appraisals, LLC - Highlands Ranch, CO

Craig that is right on, I see it time and again and when the listing Realtor says something like "the value should come out" or hands me only the high comparables. I know that it is usually going to be a tough appraisal that possibly will go lower then they expect.

I wish Realtors would learn from the prospective of the Appraiser so it leaves less headache at the end and more deals close easily.

Feb 27, 2011 04:40 PM