Appraisals Not Keeping up with the maket ?
Each weekweI hear from builders and real estate agents that they are still losing
deals to low ball appraisals. This is in the markets where the house is priced fairly
and when there have often been multiple bids on the home. If one really believes
in the free market and capitalism, then two unrelated parties agree on a fair price
and that becomes the value of the property. The public is smart and if the price is
too high, they donâ€™t buy and the house doesnâ€™t sell. We donâ€™t need appraisers to
say â€œYou made a stupid deal. You paid too much.â€
The National Association of Homebuilders reports that there are over 100 improving
markets in the U.S. Even in these locations where demand is strong, appraisers
are still coming in with values below the agreed-upon prices. Appraisers appear
to be very reluctant to accept an improving market. Frank Gregoire, former
chairman of the Florida Real Estate Appraisal Board and an appraiser in the St.
Petersburg area says that many appraisers are reluctant to make the upward adjustments
they know to be justified by recent positive appreciation trends because
they fear criticism that they are potentially overvaluing the propertyâ€”exposing
lender clients to costly â€œbuy-backâ€ demands by Fannie Mae, Freddie Mac or future
Appraisers report that even with data to support a higher value, they go with a
lower valuation so as not to upset hyper-cautious reviewers at the appraisal management
companies. When an appraiser does this it hurts both the buyer and
seller and the general public, since it is delaying the recovery of the economy.
When an appraisal comes in much lower than the mutually agreed contract price,
the buyers typically need to revise their loan request â€” which may not be feasible
â€” or renegotiate the contract price with the seller which also may not be feasible.