Another low appraisal

Ah, the reality of real estate today-another low appraisal. These are becoming more and more rampant and are the bain of every real estate agent's existence. On top of the added research, work, stress, and communication with the other agent and your client, what can be done with low appraisals?

First, a thorough review should be performed to determine if any mathematical mistakes were made when adding and subtracting the adjustments for the comparables.

Second, was the subject property properly 'bracketed' by the sold comps? By that I mean, did the appraiser use relevant comps, some of which were higher in price than the subject, some about the same price, and some lower in price than the subject?

Third, are the comparables the best comps to use? Were they all in the same neighborhood as the subject? If not, why not? Sometimes there just aren't enough comps available in the subject neighborhood. If the appraiser must search outside the neighborhood, then he/she should look for similar neighborhoods to the subject and adjust for location as necessary.

Fourth, are the adjustments made fair?

Fifth, were any distressed properties (short sales, foreclosures, HUD homes, bank-owned homes, etc.) used as comps? If so, did the appraiser disclose that fact and make an additional adjustment for the distressed sale, which almost always is lower than a non-distressed sale.

Sixth, is the appraiser from the area or out of the area? If out of the area, has the appraiser perfomed many appraisals in the subject's area?

Seventh, was the subject labeled as being in a 'declining market'? If so, that can be the 'kiss of death' and require a 10% down payment from the buyer. This label is VERY difficult to remove.

As for action steps, I would gather all of my information and personally call the appraiser to talk with him/her about any discrepancies. HVCC DOES allow for a real estate agent to contact the appraiser directly, just not the lender. Not all appraisers will be open to talking with real estate agents, however. Some are more receptive than others.

If the appraiser is unwilling to adjust the appraisal, your next step is to file an appeal through the lender who will take your information you have showing that you believe the appraisal is flawed and run it through the appraisal review process. This could take up to a week.

If that doesn't work, you can always order another appraisal from a different appraiser (for a fee) and see if it will come back higher.

This is just a starting point for a low appraisal issue and there are other steps, which could be taken as well if the situation warranted. It is important to note that I am NOT a licensed appraiser, but have been through this process more times than I can count. If this post helps just one person avoid losing a sale based on a low appraisal it will be worth it. Good luck!

The Media Finally Catches Up...

It's about time! After many months, the mainstream media has finally caught up and started reporting something those of us in the industry have known for many months--the real estate market is healing. Welcome to the party!

We are seeing multiple offers, homes selling in days, and in some instances, for more than asking price. The bad part is that appraisers are still making things difficult and, in my opinion being too conservative and killing deals by valuing homes too low despite a ready, willing, and able buyer and seller happily paying the agreed upon purchase price and easily defensible comparables. So, buyers and sellers beware! Just because you got a great price for your house, that doesn't mean you are going to get an educated appraiser who will properly value your home.

If you qualify for the $8,000 first-time home-buyer tax credit, you only have until November 30th to close on your new home. And, don't forget that if you are bringing $10,000+ to closing, your funds MUST be wiring to the title company-absolutely NO exceptions.

Watch out for low appraisals

OK, so there are many sources out there pointing to the fact that we are heading for a real estate recovery. Monthly inventory continues to decline, sales are going up, never before seen market conditions exist for first-time buyers, and multiple offers are becoming a regularity in many neighborhoods (out of seven pending homes in a Carmel, IN neighborhood, they all had multiple offers!).

However, due to new appraisal guidelines known as HVCC, we are seeing low appraisals on home sales. This is affecting up to 50% of sales for some lenders and real estate agents. It is getting so bad that appraisers are the ones setting home values, not the market-buyers and sellers. This is just the beginning of this problem and it will continue to get worse. If you are thinking of selling your home, consider getting an appraisal before it goes on the market so you have an expectation of what to see after you find a buyer. It is a mess!