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)