The new reality of bank appraisals
By Louise Bolger
sun staff writer
Are you in love with your home? Well it is Valentines
Day, so I guess you should be in love with something and it
might as well be your home. But what if youve accepted
an offer on your home, signed a contract with a mortgage contingency
clause and are feeling pretty fat and happy right now. Hold
on, dont start packing the crystal yet, at least not
until the bank appraiser has weighed in on your homes
If the terms of the sale of your home include your buyer obtaining
financing, then you can expect a visit from the lenders
appraiser. Real estate appraisers are employed by lending
institutions to verify that the property being financed is
indeed worth the mortgage being applied for plus the down
The way appraisers evaluate property is mandated by previous
sales of comparable properties. Primarily appraisers get their
information from county records, but they may also solicit
information from local real estate brokers regarding the condition
of properties and market trends in order to draw reasonable
and accurate conclusions.
In a real estate market that is basically level with modest
appreciation or modest depreciation, the appraisal process
has fewer disputes. However, if the market is appreciating
at leaps and bounds every year, like weve experienced
for five years, or if suddenly the market is depreciating,
it becomes a challenge to everyone in the process.
We lived through the appreciating market and Im sure
there were plenty of appraisals that came up short of the
selling price, since it was impossible for the appraisers
to keep up with a market appreciating practically every day.
Short appraisals can be resolved by either the buyer putting
down more cash requiring a smaller mortgage, or the seller
reducing his price in order for the home to qualify. Most
of the time its a compromise to all parties to the transaction.
Now, however, were living through an adjustment to the
real estate market that has not only fewer sales but also
lower sale prices. In a sluggish real estate market, finding
comparable recent sales could be a problem forcing the appraiser
to use sales that may be out of the area or not equivalent
to the property being evaluated and then making adjustments.
This becomes even more complicated if there happened to be
a very low or possible distress sale skewing the values even
Since appraisers are quick to point out that they are independent
and unbiased in the evaluations, its difficult to get
an appraisal you may not agree with reevaluated. Of course,
a new appraisal can be ordered by either party to the transaction
in the hope there may be a new comparable sale that would
change the value of the property, or a different appraiser
may view conditions differently.
During the best of times, evaluating property is more of an
art than a science. Its a business that is always playing
catch up. The reality of the marketplace is invariably ahead
of the published data the appraisers are obligated to work
with. If youre selling in this market, the best advice
is to stay on top of all sales in your area, hope for a buyer
with a lot of cash and love your home.
Happy Valentines Day!