In years past, when an appraiser in Central Florida determined the value of a property that was under contract by a Buyer, they did so by using closed sales. Of course, consideration was always taken when the appraiser selected the comparables used to make sure that they truly were comparable, but never before have I known an appraiser to use "pending" or "active" properties to determine what the price should be for a home under contract.
Until now.
Within the last few months, it has become evident that lenders are attempting to minimize their risk by requiring that appraisers evaluate not only closed sales, but also properties that are active and currently under contract when determing the value of a home.
Kelly Kellogg, a property appraiser in Central Florida, verified that statement today in a presentation held by one of the largest lenders in the South, SunTrust Bank.
Ms. Kellogg indicated that loan underwriters are requiring that appraisers provide at least three closed sales (preferably within the last 30 days, but up to 90 days will be accepted), one comparable pending sale and one comparable active sale.
While in theory this might have merit, I wonder how it is that properties that have not sold, or are being listed at a price that may never get accepted (as a short-sale or pre-foreclosure) can truly be used as comparables when determining the value of a home that a qualified Buyer has made an offer on?
As a Buyer's Agent, I am quite concerned that if this method of appraising properties continues to be accepted, then the real estate market will continue to decline. By using active and pending properies, the value of homes owned by Sellers who are not in distress will be be driven down by those who are...which doesn't quite seem fair to me.
What do you think?
LaShawn Norden, PA, REALTOR, RE/MAX Central Realty, (321) 377-0157, LaShawn@LaShawnNorden.com
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