Are appraisals coming in too low?
See what a leading expert has to say
We have been discussing for several months the fact that the real estate market is on the rebound. This rebound is largely due to historically low levels of inventory, but it is indeed on the rebound.
This brings up a very interesting question – are real estate appraisers catching up to the current trend of solidifying, and in some areas increasing, home prices? Recently the San Diego U-T published an interview with Ken Wilson, Vice President of The Appraisal Institute.
In the interview, Mr. Wilson answered the question about “low appraisals” occurring for several homes which have caused sales transactions to become derailed. His response was that appraisers’ jobs are to read and react to the market, not create the market. He also said that appraisers are responsible to the lenders who hire them, not the real estate agents whose transactions are at risk if the appraisal comes in below the agreed-upon purchase price.
It is definitely true that the appraiser should not be beholden to just “come in” at the purchase price. If the value isn’t there, then the appraisal should not come in artificially high. However, it does seem that there are instances where the appraiser isn’t taking into account the current market trends. The appraiser should strongly consider things like the current lack of inventory and if there are multiple offers on the property in question. Many times they do not.
While we certainly do not advocate that appraisers should create inflated values (that’s one of the reasons why we got into the mess of the last 5 years), we just feel that they consider all relevant factors when determining their values.
Bryan & Allison Devore
Prudential California Realty
North San Diego County and Carlsbad Real Estate
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