Market Conditions in 91423>Question Details

Mom, Other/Just Looking in 91423

Are appraisers downgrading these properties? The reason I ask is because I heard of a recent appraisal on a property that was about $70,000 over the

Asked by Mom, 91423 Fri Jul 9, 2010

previous year. I researched articles on CA appraisals and some reports indicate that this was the case. What this does in effect is make these properties unavailable for rate modification. If this is true, shame on them. Their actions are doing nothing to help CA's economy. Any info regarding this?

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Cynthia Sparagna’s answer
Dear Mom:
Like every market, it truly depends on the property's location, condition and price whether or not an appraisal is "favorable" or not. Last year there was a change in appraisal regulation and we saw a lot more conservative appraisals coming in. Depending on the location/neighborhood of the property, the appraisals are indicating a response in favor of a slightly higher market than last year. Honestly, the appraising has nothing to do with loan modifications from what we are experiencing in my office. Since the banks have the TARP money, they are not realy working hard to assist folks in loan mods. Also, what people don't understand about loan mods is they are not loan reductions, simply a reduction in monthly payments for a temporary amount of time. Most of my clients and friends are not getting much support from their mortgage lenders in providing them a loan modification.
Cynthia Sparagna 818.207.9399
E&A/Sotheby's - Sherman Oaks
0 votes Thank Flag Link Fri Jul 9, 2010
I can only answer based on the last few escrows I have been involved with. What we are seeing with the impression of an improving economy are more favorable appraisals. The appraiser is going to find the best "comps" for that house, and adjust the value accordingly. However, since the market has stopped it's steep decline, the banks and or appraisers are no longer saying it is a declining market (this depends on the area you live in the U.S.) and because of this the appraisals are more likely to come in around the sale price. Remember, their job is not to help the CA economy, it is to give a fair market value for a property.
0 votes Thank Flag Link Fri Jul 9, 2010
If there have been enough new comps in the area you're talking about to justify the value the appraiser found, then the appraiser is not doing anything wrong. The problem lies with the bank that is choosing to fund the loan, in my opinion.

Example: A neighborhood in Chino called The Preserve has resale homes (98% are REO & short sale) & are sporadically selling brand new homes. The appraisers must find "Like" new homes to compare them with & the banks are accepting this practice. This IS a problem because the same sized home that's selling down the street as a resale / short sale, many are in the same perfect condition with all the upgrades like the new homes,,same sized homes are selling for as much as $120K LESS.

So, the second that buyer, buys the new home, moves in & goes to try to resell in 6mos (they likely won't do that, but if they did) the home will comp out as another Resale home & they've got Instant Negative Equity.

Banks are further creating a mess for themselves. Don't blame the appraiser, but the banks' acceptance of the methods in which they appraise.

EmilyKnell1@yahoo.com
562-430-3053 cell
0 votes Thank Flag Link Fri Jul 9, 2010
Mom,
Your question is a good one. However, you seem to ask if appraisers are downgrading and yet your example was an upgrade.

To put it mildly, yes, appraisers have been shooting lower. They really took a beating for estimating higher property prices in the market run up. So now they are much more conservative. This can help buyers. I had one property where we went to escrow at about 500k but the appraisal came in at 485k. So my clients signed an addendum that said the bank will only loan on that value. The sellers dropped their price and my clients saved 15k. Some listings now try to take the appraisal out of the contingencies to prevent that from happening.

But it is not the appraisers fault. They have a lot of pressure from regulators.

If you need help, please give me a call or send me an email.

Tommy Lee
323-821-2292
tommy.lee@dilbeck.com
0 votes Thank Flag Link Fri Jul 9, 2010
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