The Pendulum Swings to the other extreme:
Low Appraisals are Hurting Home Sales
The appraisal industry has taken a hit due to the crisis in the mortgage banking industry and mortgage fraud. There were a new set of guidelines developed by the regulatory commissions to create more œarms length compliance between Appraisers, Lenders, Buyers, Sellers, and Realtors. As a result, lenders must now use a œlottery system to assign an appraiser to value a home under contract. So what? Well¦This means that you could end up with an appraiser who doesn™t regularly appraise homes in a specific area, and therefore, doesn™t know the local market.
I had a situation recently where we had a contract for $239,500. The buyer was willing to pay that for the home. The appraisal came in at $225,000! Both myself and the Buyer™s agent felt this was a low estimate of the value of this home. But, the lender used the appraisal. Needless to say, the buyer wanted to pay $225,000, and my seller wasn™t going to sell for that. He asked me¦ How can market prices rise if the appraiser is looking at past sales??? Good question. Anyone got any answers?