HVCC

Appraisals – The Next BIG Hurdle In Buying & Selling Real Estate!

Jim Walberg provides a first hand experience regarding what is becoming the next BIG hurdle for Buyers and Sellers of real estate, and it is starting right now!

We just concluded an escrow that has given us a glimpse of what may be the next BIG hurdle for your next real estate purchase - APPRAISALS.  We sold a listing this month in the high 900,000s. It was the lowest priced sale since 2003 in this neighborhood of homes that have the largest floor plan – 3,450+ square feet.  ( The reduced listing price reflected the fact that the Sellers had already moved out of state and wanted to just close the chapter on their time in the East Bay.)  Their home was the most beautiful home in it’s class in our geographic area.

So, the appraiser for the Buyer’s lender comes in and completes his work.  The lender had chosen an appraiser that had very little knowledge of our specific area.  Because of this fact we sent the lender a list of the comparable sales in this neighborhood for the last two months in order to provide the appraiser with data that we knew were sales of comparable homes. The lender told us they were not able to forward them to the appraiser because they are required to keep an arms length distance from any of their appraisers because of the new law that is officially going into effect May 1, 2009.

“The lender or any third party specifically authorized by the lender (including, but not limited to, appraisal companies, appraisal management companies, and correspondent lenders) shall be responsible for selecting, retaining, and providing for payment of all compensation to the appraiser. The lender will not accept any appraisal report completed by an appraiser selected, retained, or compensated in any manner by any other third party (including mortgage brokers and real estate agents).”

This was the first clue we were going to have a different experience with this appraisal. The appraiser used only two comparable sales, both of which were homes that had been purchased back by relocation companies that had no comparison to our listing. One of the homes used even backed to a storage unit complex. Our listing has unobstructed views of our mountains and very private.  The appraiser would not consider using any of the comparable sales that we had provided within the neighborhood.

The appraisal came in $50,000 LESS than the purchase price that was already a bargain in our market area!  We and the Seller were stunned!  We called the lender and asked what their review process was. They said there was none available. Again, we were stunned. This one event has now created a situation that the similar homes that are within a mile of our listing are all going to be impacted by this appraisal,  and it will have a detrimental effect on all of their values for months to come. Our Sellers have been short-changed by this experience and any future sellers will need to price their home using this new reduced price as the basis for their homes.  

The National Association Of Mortgage Brokers has begun a legal battle to reverse this latest law.  They believe, and so do I, that this new regulation will negatively impact both sides of the real estate sales transaction.  It will also add costs to the appraisal process, because there will now be a new entity springing up in the midst of the home buying process – third party companies that order appraisals.  The increase in costs will be to these companies in order to the have the appraisers still be paid a fair fee.  Stay tuned!  This specific regulation will have an impact on pricing in all of our communities.  So, have any of you had similar experiences with appraisals yet?