While the public is eagerly debating the current state of the reeling real estate business and all the failed mortgage lenders, keen industry observers are focusing their attention on a new development. Even though it's an essential element in a home sale transaction, overall it receives very little notice. We are talking about the appraisal.
You are starting to hear stories from different areas of the country where appraisals are coming in high from the price buyer and seller have agreed on. How is that? If you recall, not too long ago appraisals typically couldn't keep up with the value increases and subsequently turned up low. And everybody was complaining because many deals were now in jeopardy.
One reason is that the high inventory of homes available for sale forces sellers to cut their price to attract buyers. And to top that off, buyers are aware of the situation and do their best to negotiate the price even lower. All this maneuvering can reach quite a bit below actual and reasonable value and of course works against the seller. Well, isn't that what the buyer's market is all about?
Appraisers normally use local recorded price data and tax assessments to figure out their numbers. But the blown-up prices of the recent past, hidden concessions and flat-out fraud have distorted the information they consider. Therefore the so-called comps, or comparables, can be off target, usually on the high side, and mislead whoever reads them.
Also, the marketplace today can be shifting rather quickly in many cities, towns and even subdivisions and the appraisal field simply can't keep up with it. One way to find out more about property values is to look for sources beyond the recorded data, like talking with agents about listings and particular neighborhood developments.
How would you like to be a seller who sold for much less than the appraisal?