“Over the past several years, appraisals have impeded our market's ability to recover naturally.”
I read this in a blog today… this is just one sentence – it goes on and even worse, credits an appraiser who openly tries to meet contract prices and discusses/reassures listing agents/buyers of anticipated value. Scary!!!
Well, anyway, I felt compelled to defend not just myself, but the appraisal profession as a whole. I guess I am slightly offended by the bad rep always being dished out to appraisers. I mean, don’t get me wrong, I get just as ticked off by the lazy and incompetent appraiser as anyone – probably even more so, but when done right by a diligent, competent appraiser, an appraisal is the only impartial reporting of value in a real estate transaction.
Buying or selling a house is a very emotional thing for almost every party involved in the transaction (yes, even you investors out there). Whether you fall in love with its architecture or location or price (wink), or its ability to house a home business… whatever it is, people love their homes. And frankly, in this market, there are just as many people who hate having to sell them. Now, I don’t claim to know the market in every state, only in the DC Metro, but let’s be real: It’s crazy! We have banks under pricing, owners overpricing, short sales trying to recover a 2005 purchase price, and a few unprofessional agents out there who will list anything that comes their way, regardless of price and who will sell whatever buyers want to buy. (I know, you guys would never do that)
Now, in the post I read earlier, there were many comments regarding market value being what a buyer is willing to pay. WRONG! Any utilized definition of market value includes a statement regarding both parties being knowledgeable or well informed. And I hate to say it; there are MANY buyers out here who are misinformed and misguided. They have little concept of what a house is worth, and trust in the guidance of loan officers to tell them what they can afford or agents to tell them what’s a good deal. So many buyers are more concerned with a monthly payment than with a sales price. So, no, just because a buyer is willing to over or under pay for a property based on misguidance does not make it market value.
Now, in a typical transaction, you have a buyer, you have a seller, you have a listing agent and you have a selling agent, you have a loan officer, you have an appraiser and you have a bank. Your seller, listing agent, selling agent and buyer’s agent all have big checks to collect at the end of this transaction – they want the deal to close or they don’t get paid. The buyer and the bank, however, have a lot to lose – they are the ones coming up with the loot! Typical buyers have emotional ties to a property they want to purchase; rationale often goes out the door, and aside from that, most buyers aren’t market experts, they are trusting in one of the previous parties of the transaction to properly guide them. The banks are the ones taking the greatest risk, as they are usually half way across the country, will never see the property, and don’t have a clue about the real estate market where it’s located. Yet, we get upset when we ask them for a half a million dollars and they want reassurance as to the loan’s security.
Appraisers are meant to be completely impartial. They have no present or past interest in the properties they appraise – they have nothing to gain or lose by the transaction. They get paid the same fee for their service whether the “deal” closes or not.
They are intended to be the voice of reason in a transaction built by commissioned sales persons. They are meant to minimize monetary risks by providing a fair report of true market value.
Now, are there appraisers out here who are terrible at their job – YES! I review their work and let ‘em have it J. But… are there just as many agents out here who sell a house here and there and have no idea of the market or of basic house construction, etc? Yes – we all know a few. If everybody did their job right and did all their due diligence, there would fewer surprises at the closing table.
But to actually infer that appraisers are preventing the market from recovering? Ouch, that’s a little harsh, don’t you think? The market is what it is – all we can do is accurately report on it.