Does Emotion Drive Appraisals ?

Real Estate Agent with EXP Realty 414-525-0563 57026-90 Broker

The spirit of Thinventory remains strong in many areas of the southeastern Wisconsin real estate market. Smart Sellers are getting their multiple offershomes "all dressed up and ready to sell" . The lack of inventory has Buyers standing in line and minimizing discussed in an earlier read it click here...we see inspections disregarded...hugely "attractive" earnest money deposits...flexible closing  dates. Whatever combination of incentives seem most attractive to a Seller are employed by anxious Buyers.

  Time was ...not sooo long ago and far away that Agents told Buyers that Appraisals were the "lifeline to reality"....their lender would not allow them to OVERpay for a home. This third party objective source would verify that current homes sold were evidence of the value of the subject property that they were purchasing. IF the home "didn't appraise" smart Sellers would renegotiate the price and lower it to match the appraisal. There was a fear that the home would again at this "objective price"...or Worse...would appraise for less.

   As agents know...or should...and many consumers do not...the appraiser is given the offer to purchase when given the appraisal assignment. Some people liken this to an "open book test"...the answer is in plain sight  and supporting data just has to be "made to conform" to the answer and Bingomagically regardless of the amount the Buyer paid over the asking price...and some people might say...over the market price...BINGO...the property appraises for exactly the price the Buyer has agreed to pay.

   Let's look at one more aspect of the offer...the amount of money that a Buyer has as a down payment...which translates to the amount of risk that a lender may or may not have should unforeseen circumstances cause the Buyer to default on the loan. From our experience...the less the risk the greater the liklihood that no matter what the price is the Buyer has written ...the property will appraise for the amount of the offer. If the Buyer has chosen a 5 to10...or anything less than 20% down payment ...then there may well be a difference between the appraisal and the purchase price and the olden days of renegotiation of the price may again surface.

    We won't say that the appraisal is a safety net...we have not said that safety netfor a few years....because....we have seen it vanish proportionately with the amount of the down payment a Buyer has,,,their "financial worth" seems to sway what was once believed to be objectivity.

    Buyer Beware takes on a new meaning...emotions sometimes override logic in determining the amount of an offer...and we believe...when the financial stars align...subsequently guide the appraisal.realestateappraisals#appraisalobjectivityvanished

  This has been a real estate opinion post brought to you by Sally K. & David L. Hanson,Broker Associates with EXP Realty, LLC, honored to be of service for all things real estate in southeastern Wisconsin.

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Sally K. & David L. Hanson, ABR, CDPE, CSS, e-Pro,ILHM, REDS

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Jay Markanich
Jay Markanich Real Estate Inspections, LLC - Bristow, VA
Home Inspector - servicing all Northern Virginia

Once an appraiser walked into the house during a home inspection and asked the realtor how much she wanted the house to appraise for.

Jul 11, 2019 03:20 AM #1
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

They don't have to ask Jay Markanich they are given the offer to purchase with the price on it when they get the appraisal assignment...and open test.

Jul 11, 2019 03:26 AM #2
Barbara Todaro
RE/MAX Executive Realty - Franklin, MA
Marketing Agent for The Todaro Team

Good morning, Sally K. & David L. Hanson I love the analogy of the open book test.... so true... all they need to do is work that backwards and find the comps that fit....

Jul 11, 2019 03:29 AM #3
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

As a former VA appraiser, I fully understand the challenges.

Jul 11, 2019 03:48 AM #4
Ginny Gorman
RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI
Homes for Sale in North Kingstown RI and beyond

Sally, no appraisal is a safety net if the real estate market tanks in the buyers' is a lesson to be learned by all...when you buy and knowing the economics of real estate & jobs is all relevant.  

Jul 11, 2019 04:49 AM #5
Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

Good morning Sally. An open book test with the big variable, downpayment, disclosed. And the answer is.... Enjoy your day 

Jul 11, 2019 04:49 AM #6
Nina Hollander
Coldwell Banker Residential Brokerage - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

Hi Sally... I've overall given up trying to figure out what is in the minds of appraisers. I've seen homes that really were pushing the edge of the envelope in terms of contract price appraise and homes that had a bunch of comps practically next door not appraise.

Jul 11, 2019 05:01 AM #7
Jay Markanich
Jay Markanich Real Estate Inspections, LLC - Bristow, VA
Home Inspector - servicing all Northern Virginia

I know dat!  He was in the house two minutes and I know asking what the realtor wants for a value is not the process!

Jul 11, 2019 05:41 AM #8
Lawrence "Larry" & Sheila Agranoff. Cell: 631-805-4400
The Top Team @ Charles Rutenberg Realty 255 Executive Dr, Plainview NY 11803 - Plainview, NY
Long Island Home and Condo Specialists

Can't figure out some appraisals Sally and David. Recently, we had two condos almost identical in the same community but with different appraisers...both were totally different! 

Jul 11, 2019 05:50 AM #9
Brian England
Arizona Focus Realty - Gilbert, AZ
MBA, GRI, REALTOR® Real Estate in East Valley AZ

Having inspections disregarded is a scary thing, hopefully, they are at least having inspections to know what they are getting into, even if they aren't going to ask for any repairs.

Jul 11, 2019 05:53 AM #10
Ron and Alexandra Seigel
Napa Consultants - Carpinteria, CA
Luxury Real Estate Branding, Marketing & Strategy


I like the analogy of the open book test. When we bought our home in Los Angeles, the first appraiser used comps from the next county rather than down the street from us. Luckily the bank realized that, and fired him.  A

Jul 11, 2019 06:06 AM #11
Norma J. Elkins
Elite Realty Group - Morristown, TN
Realtor - Elkins Home Selling Team

An open book test is a great concept or description for appraisals and it is so important not to consider it a safety net.  Excellent blog... thanks for sharing!

Jul 11, 2019 06:39 AM #12
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Good morning Sally K. & David L. Hanson - this is another example of when the objective becomes subjective.

Jul 11, 2019 08:41 AM #13
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hello Sally and David - I like your "open book exam" example.  Real world, real life and real estate draws many comparisons.  

Jul 11, 2019 10:17 AM #14
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Sally and David these days apprasials are ordered through Appraisal Management Companies and no longer ordered directly by Lenders.  The only contact a Lender is allowed to have with an Appraiser is to ask for clarification on something in the appraisal, and Loan Originators are not allowed to have any contact with Appraisers.  The only documentation an Appraiser is provided with from a Lender is the Sales & Purchase Agreement, and any addendum's to it.  No financial information is shared with an Appraiser.  If the Realtors involved in the sale and purchase of the property did their CMA's correctly then the CMA's and appraisal should be very close.  And in a market where inventory is tight with few comps, the sales price and appraisal should always be very close.

Jul 11, 2019 12:45 PM #15
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

Yes George Souto we are well aware that appraisers are "independent"... however... "The ONLY thing" STILL the answer book....and subject to suspicion just got a piece of some what we call "creative writing" today...not a lick of similarity from the Subject Property and the "comparables".....they aren't close....there is no close when the buyer pays tens of thousands over asking price.

Jul 11, 2019 12:50 PM #16
Sheri Sperry - MCNE®
Coldwell Banker Residential Brokerage - Sedona, AZ
(928) 274-7355 ~ YOUR Solutions REALTOR®

Hi Sally K. & David L. Hanson - Besides some of the challenges already mentioned, there are many instances in Sedona where appraisers are coming from well out of the area to do the appraisal. This forces long delays. 

Jul 11, 2019 05:14 PM #17
Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

Hi Sally and David- I have to agree with the others that your analogy to an open book test is an apt one!  It certainly diminishes the value of the appraisal. 

Jul 11, 2019 07:45 PM #18
Anita Clark
ColdwellBanker SSK Realtors ~ 478.960.8055 - Warner Robins, GA
Realtor - Homes for Sale in Warner Robins GA

Sally: There is certainly some subjectivity in the process which can be very frustrating. I just closed on a home that should have appriased but didn't...fortunately the buyer/seller were willing to meet in the middle.

Jul 12, 2019 10:24 AM #19
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Sally K. & David L. Hanson

WI Realtors - Luxury - Divorce
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