Real estate professionals and mortgage loan officers say that appraisers seem to be reluctant to report price appreciation occurring in numerous spots across the nation, and it’s complicating sales transactions, The Real Deal reports.
Appraisal problems — where property valuations have come in lower than the agreed-upon sales price — have been an ongoing problem in derailing many real estate transactions the last few years. And despite reports of several markets seeing an increase in their home prices, many agents report that appraisals continue to be a sticking point.
Thirty-three percent of real estate professionals say they are continuing to face appraisal problems, according to a survey conducted by the National Association of REALTORS® in May.
Low appraisals “in markets that are no longer in decline is the single most important” valuation obstacle to “seeing a real recovery,” NAR President Moe Veissi says.
Appraisers may be being overly cautious, not wanting to be accused of potentially overvaluing properties, says Frank Gregoire, an appraiser based in St. Petersburg, Fla., and also a former chair of the Florida Real Estate Appraisal Board. Gregoire told The Real Deal that appraisers fear they may expose lenders to future lawsuits or high-cost “buy-back” demands by Fannie Mae and Freddie Mac.
“Appraisers are scared to death” to report rising values, Joseph Petrowsky, owner of the mortgage company Right Trac Financial Group Inc. in Manchester, Conn., told The Real Deal. Petrowsky says the appraisals aren’t reflecting the pick-up in some markets, in which some properties have even seen bidding wars.
Dennis Smith, co-owner of Stratis Financial Corp., recalls a bidding war recently in which four buyer offers took the contract price from $350,000 to $375,000, but the appraisal valuation still came in lower the contract price.
Nevertheless, the Appraisal Institute insists that appraisers aren’t discounting price appreciation in markets. Appraisers have a professional duty to arrive at valuations that “reflect the market,” whether positive or negative, and also reflect the most recent data, says Sara W. Stephens, president of the Appraisal Institute.
Source: “Appraisers ‘Scared to Death’ to Report Rising Prices,” The Real Deal (June 22, 2012)
Related Articles
Share
About Author
(1) Reader Comment
Leave a Reply
2013 NCAR President Video Message: Proposed Tax Code Revisions
I think Patrice hit the nail on the head concerning new taxes on RE.
New MLS Tool: Listingbook AI is Coming Soon!
JoLynn - you'll need to contact Listingbook directly. The MLS does not
New MLS Tool: Listingbook AI is Coming Soon!
I need to cancel my seat for Thursday morning I have a family emergecy
Official Notice to Amend Bylaws: Adding New Membership Category
Excellent proposal. Please consider minimal comensurate dues.
Susan Wolfson
Appraisers are NOT SCARED. They are economists that specialize in the real estate market. They analyze the most recent comparable sales to develop an opinion of market value. AND they are required to analyze and report the comparable sale / listing market over the past 12 months.
If there are NO comparable sales to suggest that market prices are raising, then there is NO factual data to support the broker’s opinion, mortgage or real estate, that real estate sale prices are increasing in any market. Some may be in some select markets, but most are not.
In most markets, banks are still selling REO properties at less than what a homebuyer would like to sell their home for. This wouldn’t happen if Banks were required to sell at the NON-REO market prices. But, they sell them for less because they want to get rid of them and they don’t care if they loose money because they get back what they loose from mortgage insurance.
When there are many REO sales in a market / neighborhood, then those lower prices affect other non- REO prices. Why would any buyer pay full price for a property if they could get a decent house for a cheaper REO price? They don’t. They buy the cheaper REOs if they meet their needs. Some REOs are fixer uppers and that is reflected in the appraiser’s adjustments for condition on the sales comparison grid in the appraisal report.
The economy would not be in this mess if Brokers, mortgage and real estate didn’t inflate prices to begin with and feed the inflationary bubble. They are NOT independant parties to the transactions as appraisers are required to be. The broker opinions are jaded by the fact that when homes sell and are mortgaged the brokers make their commissions based on the sales prices and mortgage values. Higher prices and higher mortgage values means higher commissions. That is the reason why they want appraisers to report higher prices.
Everyone understands that economists analyse the economy and report what their opinion for the near future is as based on the available data, subject to market responses to future events. Appraisers do the same, analyzing the RE markets CONSERVATIVELY to prevent property value recovery that is NOT based on competent market analysis.
Just my two sense,
Susan Wolfson
Azalea Appraisal Services
Wilmington, NC