Jun
23


Are appraisers falling behind on home value increases?

Saturday, June 23, 2012

Are some appraisers failing to see the improvements in real-estate values in local markets that have recently bottomed out and turned positive? Chris White says several recent offers on his listings have appraised lower than their true value. Fortunately he's been able to provide more data for the appraiser to review and increase the value.

When multiple bids push a house price thousands of dollars above what the seller is asking — not unusual in neighborhoods where demand is particularly robust — are appraisers still coming in with values below the agreed-upon contract number?

Yes. Growing numbers of loan officers and real-estate agents say appraiser reluctance to report local appreciation is becoming a significant complication in sales transactions.In a new poll of its members, the National Association of Realtors found that 33 percent of them reported appraisal problems during the month of May.

Moe Veissi, president of the association, said poor appraising "in markets that are no longer in decline is the single most important" valuation obstacle "to seeing a real recovery." According to Chris White, "when multiple offers come in on a home appraisers need to rethink value. Prices are on the upswing and they need to get on board."

Even appraisal experts concede this is a troubling issue. Frank Gregoire, former chairman of the Florida Real Estate Appraisal Board and an appraiser in St. Petersburg, says that many appraisers are reluctant to make the upward adjustments they know to be justified by recent appreciation trends because they fear criticism they are potentially overvaluing the property — exposing lender clients to costly "buyback" demands by Fannie Mae or Freddie Mac, or to future litigation.

"Even if they have the (local) data to support" adjustments reflecting positive trends that affect value — pending home sales and new listings of similar houses at higher prices, for example — "they take the easy way out" and go with a lower valuation so as not to upset hyper-cautious reviewers at the appraisal-management companies that now control the bulk of all home real-estate appraisal assignments, Gregoire said in an interview.One appraiser in his area recently assembled strong supporting data to make an upward adjustment to a valuation based on recent sales activity on comparable houses.

When he delivered the report to the appraisal-management company that hired him, an official of the firm sent it back immediately with instructions to "revisit" the upward adjustment, i.e., get rid of it.

Joseph Petrowsky, owner of Right Trac Financial Group, a Manchester, Conn.-based mortgage company, says too often valuations in upward-trending markets "aren't catching up with the new values, let alone a property that was involved in a bidding war."

He cites a series of recent loan applications where the appraisal was thousands of dollars below the agreed-upon final contract price, endangering or blowing the deals.In one case, the buyer signed the contract at $312,500 but the appraisal came in at just $280,000, despite readily available evidence that the local market has experienced appreciation in recent months.

"Appraisers are scared to death" to report rising values, said Petrowsky. "I talk to them, and they are beside themselves. They feel they have to (deliver) appraisals they know should be higher."
Much worse, though, is the impact on sellers and buyers.

When an appraisal comes in much lower than the mutually agreed contract price, the buyers typically need to revise their loan request by increasing the down payment — which may not be feasible — or renegotiating the contract price with the unhappy seller.

Dennis Smith, a co-owner of Stratis Financial in Huntington Beach, Calif., says the problem is magnified when the appraiser assigned by the management company travels from 30 or 40 miles away, and has no insights into neighborhood appreciation trends that may be relatively recent.
He cited an example where a client saw a bidding war — four offers that pushed the contract price from the listed $350,000 to $375,000 — but the out-of-town appraiser would not take this into consideration in arriving at the final valuation.

Sara. Stephens, president of the Appraisal Institute, the industry's largest association, says it is every appraiser's professional duty to arrive at valuations that "reflect the market," including recent changes — whether positive or negative — if they can be verified with authoritative and accurate data.

How can buyers and sellers guard against the see-no-appreciation problem?

Tops on the list: Make sure the real-estate agents on both sides of your transaction have assembled accurate data on "comparable" sales or pending sales that demonstrate how the market has changed in the past six months or less.Then make sure the appraiser sees the data.
Your purchase or sale doesn't have to be jeopardized simply because the appraiser doesn't have, or chooses not to collect, all the relevant recent facts.





Comments subject to review.
Monday, May 29, 2017
Generational Housing Needs and Their Effect on the Market

Saturday, May 13, 2017
Consumer Agency Launches Tool To Help You Find A Cheaper Mortgage

Saturday, April 8, 2017
King County home prices resume their climb

Tuesday, September 17, 2013
Keys to Help Buyers Compete in a Seller's Market

Thursday, May 23, 2013
10 Things Buyers Need to Know

Sunday, April 14, 2013
Women Consider Owning a Home to be a Vital Component of the American Dream

Tuesday, March 19, 2013
The 8 Top Home-Selling Mistakes You Should Avoid

Thursday, January 10, 2013
Fiscal Cliff Bill a Benefit for Homeowners

Sunday, December 2, 2012
Should You Help Your Adult Kids Buy Their First Home?

Monday, October 29, 2012
Economists Bullish on Housing Recovery

Sunday, October 21, 2012
What is moving housing upward?

Monday, September 10, 2012
Five Common Mortgage Myths

Thursday, August 2, 2012
It's a great time to be a seller

Saturday, June 23, 2012
Are appraisers falling behind on home value increases?

Wednesday, June 6, 2012
Is Now the Time to Invest in Rentals?

Wednesday, May 30, 2012
4 Guidelines for Successful Negotiations

Thursday, May 24, 2012
5 Reasons Now is the Time to Buy

Tuesday, May 15, 2012
Seattle-Bellevue-Everett Unique Housing Market

Thursday, May 3, 2012
Buying a home won’t get much cheaper

Tuesday, April 24, 2012
New Rules to Speed-up Short Sales

Thursday, April 5, 2012
Home Prices to Rise in 2013

Thursday, March 22, 2012
Buying Cheaper than Renting in 98 of Top 100 Major U.S. Markets

Sunday, March 11, 2012
Five Tax Breaks for Homeowners

Thursday, March 8, 2012
How the FHA Loan Plan Can Help You Refinance

Thursday, February 16, 2012
Housing Crisis to End in 2012 as Banks Loosen Credit Standards

Estella said
"That is a beautiful shot with very good lighting ." about Women Consider Owning a Home to be a Vital Component of the American Dream
on Sunday, May 12, 2013 @ 9:57 AM

Chris White - Team Leader said
"Unfortunately you are not alone. It's more than an outcry. The powers that be really need to come down harder on Bofa than they already are. Working on these short sale for over 2 years now I've uncovered down right fraud happening on the lenders parts. If they cared more about moving this country forward than protecting their own wallets then they would cut the red tape and approve these short sales in a timely manner. Our team made the wise decision to get BofA loans which were FHA or Freddie Mac backed, approved prior to listing on the market. Then we can list the home as "Price Approved" and close in 30 days. In this instance BofA does a full appraisal, rather than an incompetent "Broker Price Opinion" (nothing against agents but they have no idea how to make adjustments on comparable homes) and then the bank issues an "Approval To Participate" letter which dictates what price we can go on the market and take anything north of 88%. I really do hope your situation improves. " about Congressional Bill to Speed Up Short Sales
on Tuesday, August 30, 2011 @ 9:15 AM

Lisa Zeiner said
"We made an offer 4 months ago to BofA, and have heard nothing. It was a cash offer which is better than the zero money they are collecting now. And since the people don't care they are trashing the place, by the time BofA gets around to it our offer will be gone as the place is a mess!! Septic issues now, garbage being dumnped. All of this could have been avoided if BofA really wanted to correct their cash flow problem and sell these properties in a timely manner. They cry about cash but then do nothing intelligent to fix the problem" about Congressional Bill to Speed Up Short Sales
on Tuesday, August 30, 2011 @ 9:06 AM

Jones Ramirez said
"Thank you for the work you have done into this post, it helps clear up a few questions I had." about How do appraiser’s determine a homes value?
on Tuesday, April 19, 2011 @ 10:07 PM

HollyRobsonf said
"Hey - I am certainly happy to find this. great job!" about Bank of America to Offer Principal Reduction to Underwater Borrowers
on Wednesday, April 13, 2011 @ 6:45 PM