I saw this article today as published by the National Association of Realtors.  I agree with the observations that Mark Stark sees.  We are seeing the same think here in Palos Verdes and the South Bay.  I believe that the lending institutions are putting pressure on appraisers to come in with values on the lower end of the spectrum.  Who can blame them?  They've been burnt by Congress forcing them in years past to make loans to un-qualified people (Thanks Barney Frank for that by the way) and now they're covering.

So what to do?  What's the solution?  Real estate sales is all about managing expectations.  Rather than hiring a Realtor that's "afraid" to talk about the 800 pound gorilla in the room, you need to have a Realtor who has the COURAGE to let both Buyer and Seller know that this problem may come up.  Let's address now, BEFORE there's an issue, let's discuss how we're going to handle if it does come up.  Does the Buyer have the cash to make up the difference?  Will they be willing to?  Will the Seller come down to the appraisal value?  Will there be time in the transaction to find a different appraiser or appeal the appraisal. 

Ultimately, the best solution is pricing the property aggressively in the first place.  This market is still soft; it's stabilizing as evidence by an improving absorption rate (see previous posts), but it's still soft.  A Seller is well served by taking historical competitive sales and pricing their property even a smidgeon below those prices.  Yes, I know, you think you're leaving money on the table ... let me assure you ... you are NOT.  You are truly creating an environment where even in this market, you are maximizing the chances of multiple offers and a quicker more effective sale.  This in turn will affect the appraiser's point of view; after all, when do you think the chances of a low appraisal are higher ... a situation wherein a home sells in 15 days with multiple offers or a situation where a home sells after 3 price reductions and 180 days on the market.  Hmmmm....

Low-Ball Appraisals Cause Problems
Real estate practitioners in Nevada, one of the areas hit hardest by foreclosures, say low-ball appraisals are slowing sales and preventing recovery.

Mark Stark, CEO of Prudential Americana Group in Las Vegas, says he thinks appraisers are too focused on projecting how much prices could fall rather than reflecting what values really are.

“The appraisers are being very conservative,” Stark says. “They are trying to cover themselves.”

Mark Madsen, communications director for Raintree Mortgage Services, says appraisers are just doing what they’ve been told. “I think appraisers are scared to get blacklisted,” he explains. “If the appraisals are too high, then banks may no longer accept appraisals from that person.”

Source: Brian Wargo, Las Vegas Sun (06/05/09)

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