There isn’t a week that goes by lately that I don’t hear a nightmare appraisal story from one of my clients. There has been a huge surge in appraisal challenges in the last 90 days and it makes me wonder what is going on!
Many transactions today are being delayed because appraisers seem to be struggling to keep up with the demand. There are too few appraisers for the number of appraisals needed. The other challenge is that while the market is super-hot right now, appraisers are coming up empty handed when searching for appropriate comparable properties.
Unfortunately, when there aren’t enough good comparables, the appraiser then has a hard time justifying a price. When a price can’t be justified, the loan is not going to receive approval from the mortgage loan underwriters.
It is critical that appraisers today look at the big picture when finding comparable properties. I don’t mean to be telling appraisers how to do their job, but we as real estate agents are getting caught in the middle and my advice is to help everyone deal with the challenges we are faced with. The big picture referred to means not only looking at the amenities of individual properties, but also the pace of the market in a particular area to extrapolate how hot a market is. When homes are selling at record low days on market and for well above list price, those are both indicators of high current demand and the appraisal price should reflect this regardless of what happened 90 days ago or whenever the comps used sold.
I recently had an appraisal discrepancy on a property where there was a $300,000 difference between two appraisals that were done within 60 days of each other. Lack of good comparables was the culprit. There wasn’t a lack of sales; there were plenty of sales occurring in the area, but the properties used were not a good match for the property appraised. This lack of comparables can lead appraisers to make adjustments, in this case illogical adjustments for this area and type of home. Sometimes those adjustments do not favor the overall final price.
The other issue is just the lack of appraisal manpower. I am hearing about closings delayed for weeks due to lack of an available appraiser.
This is an industry problem. So, what do we do as real estate agents?
Don’t just stand back and throw up your hands. If the bank is sitting on their hands, indicating an appraiser isn’t available and they will get one out when one is available, that isn’t good enough. Be nice, but be persistent.
When you are faced with an appraisal that clearly does not fit the market, you must challenge and question the appraisal. It is imperative that you get in touch with the lender and have them do a review. Supply your own research if needed. Have your sellers supply an in-depth list of all upgrades to the property along with the dollars invested.
To all the real estate agents out there, I know that you’ve had these issues. I urge you to be diligent about following through and making your voice heard when you have an appraisal that is unfavorable or unfair.