The lender will lend on the sales price or appraised value which ever is lower.
It is a function of regulations plus lending practices. The lender will lend on the sales price or appraised value which ever is lower. If a home is selling for $200,000 and I appraise it for $250,000 the underwriters want to know why it sold so low? What is wrong with it? Write a three page addendum explaining the difference in value. Please support this value with three other comparables within one mile of the subject property within the last six months.
This puts the appraiser in such an awful position. There is no upside for the appraiser. It is all downside and aggravation. The exception to this is the FHA 203K program. We have to appraise as is and then subject to the repairs being made. Costs doesn't always equal value. Does $30,000 in repairs add $30,000 in value. It depends upon the repairs.
The duties of the appraiser are becoming ever expanding. FHA and other governmental loans have the appraiser also becoming a home inspector. Their fees have been depressed by the Appraisal Management Companies (AMC's). It is no wonder that the appraisal ranks are decreasing. Not having appraisal trainee designations have further suppressed new appraisers. Requiring college degrees and other superfluous requirements deter people from entering the profession. This will be a real problem in the future.
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