Home appraisers are the unofficial umpires of residential real estate sales, deciding whether offering prices are fair or foul. But much more often than in the past, they’re striking out deals and sending buyers and sellers back to the dugout. Each month, between 10 and 20 percent of real estate agents are seeing accepted offers to buy a home founder or collapse as a result of appraisals that came back too low, according to recent surveys by the National Association of Realtors.
Low appraisals hurt both buyers and sellers. When an appraisal comes back lower than expected, buyers usually can’t qualify for as large a mortgage. That means they have to put up a larger down payment to buy the house something they often can’t do. As a result, the sale might fall through, or the seller will have to lower the price in order to salvage the deal.
There are ways to improve your chances of a good appraisal. But first, it’s important to know why this problem has arisen lately. During the height of the real estate boom, real estate agents and mortgage brokers often played a big role in selecting appraisers. These agents and brokers had a strong interest in high appraisals, because a high appraisal meant that it would be easier to get a deal to go through. So many appraisers felt pressured to turn in optimistic numbers, fearing that if they didn’t, they wouldn’t be hired again in the future.
Arguably, this resulted in a rash of unreasonable valuations, which contributed to the housing bubble.
This spawned a new industry, called appraisal management companies, or AMCs, which hire appraisers to provide independent valuations to lenders. Today, about 70 percent of appraisals are done through AMCs; most of the rest are done by in-house appraisers who work directly for banks. Some appraisers think this is a good thing, because they can be objective and are no longer under pressure to skew the numbers upward. On the other hand, some appraisers say they now have the opposite problem they feel pressure to skew the numbers downward and to be as conservative as possible, out of fear that they’ll get in trouble if a high appraisal leads to a bad loan and a default.
Other critics say that AMCs have resulted in lower-quality appraisal . Because AMCs keep a lot of the money that used to go directly to the appraiser, appraisers receive less compensation for each job, and thus they have to look at more properties in less time in order to make the same income. As a result, critics say, appraisers don’t make as careful an inspection as they might, and don’t give as much thought to whether the comparable sales they use for valuation truly involve comparable properties. Some appraisers complain that in order to increase their volume, they have to accept jobs outside their local area, where they are unfamiliar with the neighborhoods and less able to make informed judgments about comparable sales. http://rhnws.com.au/
Low appraisals hurt both buyers and sellers. When an appraisal comes back lower than expected, buyers usually can’t qualify for as large a mortgage. That means they have to put up a larger down payment to buy the house something they often can’t do. As a result, the sale might fall through, or the seller will have to lower the price in order to salvage the deal.
Arguably, this resulted in a rash of unreasonable valuations, which contributed to the housing bubble.
This spawned a new industry, called appraisal management companies, or AMCs, which hire appraisers to provide independent valuations to lenders. Today, about 70 percent of appraisals are done through AMCs; most of the rest are done by in-house appraisers who work directly for banks. Some appraisers think this is a good thing, because they can be objective and are no longer under pressure to skew the numbers upward. On the other hand, some appraisers say they now have the opposite problem they feel pressure to skew the numbers downward and to be as conservative as possible, out of fear that they’ll get in trouble if a high appraisal leads to a bad loan and a default.
Other critics say that AMCs have resulted in lower-quality appraisal . Because AMCs keep a lot of the money that used to go directly to the appraiser, appraisers receive less compensation for each job, and thus they have to look at more properties in less time in order to make the same income. As a result, critics say, appraisers don’t make as careful an inspection as they might, and don’t give as much thought to whether the comparable sales they use for valuation truly involve comparable properties. Some appraisers complain that in order to increase their volume, they have to accept jobs outside their local area, where they are unfamiliar with the neighborhoods and less able to make informed judgments about comparable sales. http://rhnws.com.au/
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