BluefoxToday blog : Appraisals turn up unusually high

Appraisals turn up unusually high

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?

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Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst 

www.BluefoxToday.com - syndicated mortgage, housing and property management blog

eskokiuru@gmail.com
My cell: 702-499-1006

Comment balloon 4 commentsEsko Kiuru • September 29 2007 08:54PM

Comments

I don't think I can agree. The appraisal is based not on sales, and it is limited in time to 6 or 12 months. So, todays appraisals should not be based on the highest numbers. At the same time latest (and most relevant for appraisers) sales are coming so low, that the appraisals are coming very low, at least in our area.

It would be interesting to hear from the appraiser.

Posted by Jon Zolsky, Daytona Beach, FL, Buy Daytona condos for heavenly good prices (Daytona Condo Realty, 386-405-4408) over 10 years ago

Jon,

Let's hear from the appraisers.

Posted by Esko Kiuru over 10 years ago
Big factor that will be coming into play more and more is the "declining market" comment that will be required of appraisers in most areas.  Most appraisers are already building in this into their considerations.  If they don't, they will lose their license quicker than quick.
Posted by Richard Sweum (1st Security Bank) over 10 years ago

Rich,

It's a tough, unpredictable business to be in nowadays.

Posted by Esko Kiuru over 10 years ago

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