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Appraisers are required by both professional standards (USPAP) and federal law to be totally UNBIASED in the evaluations process.
Nope. No attempt at humor there. Like it or not, appraisers are human. Even though they may work to be unbiased and adhere to professional standards, there still is an amount of subjectivity in what they do. I know lots of appraisers and I can tell you which ones tend to be conservative in their estimates, and which ones lean the other way. I know which ones give thorough written analysis of their opinions, and others whose work is a bit sketchy. It's not uncommon for particular clients to choose those appraisers who best meet their aims. Lenders are no exception. Welcome to the world of reality.
Question for you: If you hire three appraisers to appraise a particular property, how many opinions of value do you think you'll receive? Or do you think that they will all be exactly the same? Sure, an appraiser may not overtly render an opinion one way or the other, but subtle expectations can definitely come into play.
Last edited by jackmichigan; 03-08-2014 at 12:16 PM..
If the extra $1000 puts you in hardship, how are you going to find another house? If you found another house, you would have about $500 for inspections and another $500 for appraisal, so there's your extra $1000. Is it worth it to start over, or to just move forward with a negotiated lowered price for a house you love?
Actually, I had our mortgage banker send us another estimate of closing costs if we kicked in the other $4K. We have a lot more in savings than I first thought, so we could pay the whole $4K and still have a fair nest egg for a rainy day. So, I'm back to the original decision, which boils down more to I hate paying above Kelley Blue Book for ANYTHING, warm fuzzy feelings or no.
No body likes over paying for something, but if it's going to cost you most money to move on to the next, and you have to pay more for that house, did you really "win"? And rates are going up, so you could lose on that end too. I would hate paying over appraisal as well, but in a seller's market, it happens. I always tell my clients that it's about how they can sleep at night. If you can sleep without "woulda coulda shoulda" on this house, move on. If you're going to keep replaying the situation in your head, move forward with it.
it seems unfair
I hate paying above Kelley Blue Book for ANYTHING
1. Life is not "fair". Just remove that word from your vocabulary. This is a business transaction here.
2. Appraisals and Blue Book are not similar.
a. Blue Book value is calculated from 100s to 1000s of transactions for each vehicle make/model/year.
b. Appraisals are calculated from 3-4 transactions. And, same make/model is highly unlikely.
3. Appraisals are a lagging metric by definition. That means that they are always off by some amount unless the market is perfectly flat. Too high in a falling market and too low in a rising market.
Rising markets in 2014 are a particular problem. Appraisers took a lot of flack for being overly optimistic in the last rising market. In fact, so much flack, that onerous (and stupid) rules were created to make appraisals more "honest". This has caused (because of normal and expected human behavior) appraisers to be very cautious this time around.
$4K is a within the statistical noise. If you want the house, then find the money and buy it.
Appraisals are only an opinion of value at one given time.
In a rising market... some would even say they are flawed... because they rely heavily on what has sold and is no longer on the market... do I really care what the last customer paid for a pound of steak if there is no more steak at that price?
Only you know what it's worth to you.
If you like it and can afford it... step up and close the deal... otherwise, with most contracts, you are free to walk.
Bought one property that appraised low... it needed some work which was exactly why I wanted to buy it!
Anyway... the seller agreed to an 80/10/10 loan and we closed.
80% from the bank loan, 10% loan from the seller and 10% plus closing my down payment.
Appraisers are required by both professional standards (USPAP) and federal law to be totally UNBIASED in the evaluations process. And appraisers are the ONLY party involved in buying and selling that have that requirement.
I didn't see anything funny. You can take 5 appraisers have each look at a house and have 5 different values. It's still a educated opinion.
I wouldn't walk away from 4k if I wanted the house. I looked at this one house once and I didn't even argue the price. Walked in walked out 20 minutes alter and I said I'll take it. Signed the offer on the hood of my truck. Lost to another same amount offer but they were putting 50% down I was only offering 30% down. House had EVERYTHING we wanted. I couldn't do 50-60% down because I was starting a remodel and allocated money to that project.
Actually, I had our mortgage banker send us another estimate of closing costs if we kicked in the other $4K. We have a lot more in savings than I first thought, so we could pay the whole $4K and still have a fair nest egg for a rainy day. So, I'm back to the original decision, which boils down more to I hate paying above Kelley Blue Book for ANYTHING, warm fuzzy feelings or no.
I just paid $1000 over KBB for my son a car.
He loved it. It was exactly what he wanted and what we wanted to get him. It was in by far better condition than ANY other car we had seen. It was impeccable to be 13 years old. It is a car that is very hard to find, as people tend to hang on to them (we soon found out) so we also had to travel out of state to get it.
For us, paying more was well worth it, even though I am in your camp that I HATE paying over a valuation. But in this case it was worth it.
houses are made of tiimber and building materials, its us that make it a home-
value, worth is a moving target, but also a personal one.... you would break a deal of a place you really like just for a few thousand dollars?? or the PRINCIPle??
and yeah, ive seen this happen a hundred times, even a thousand dollars apart -
are you better off underpaying for a house, you dont like as much??? just to say what a good deal youve got?
some things in life, you just bite the bullet,,,
and dont let this take the shine of your new house,,,youve got to let this go..
life is a balance, im sure youve saved well over 3 k in your past ...on something else..
If it's any consolation, appraisals always contain some degree of subjectivity.
Understatement of the century. Appraisers use a book and a method and are
generally blind to anything which doesn't fit their technique--and often that's a lot.
A few thousand is really trivial in the grand scheme of things imho.
Although, I didn't know there were any sellers' markets in that price range!
You say 'sellers market' and I think NY, SF, DC etc.
Nope. No attempt at humor there. Like it or not, appraisers are human. Even though they may work to be unbiased and adhere to professional standards, there still is an amount of subjectivity in what they do. I know lots of appraisers and I can tell you which ones tend to be conservative in their estimates, and which ones lean the other way. I know which ones give thorough written analysis of their opinions, and others whose work is a bit sketchy. It's not uncommon for particular clients to choose those appraisers who best meet their aims. Lenders are no exception. Welcome to the world of reality.
Question for you: If you hire three appraisers to appraise a particular property, how many opinions of value do you think you'll receive? Or do you think that they will all be exactly the same? Sure, an appraiser may not overtly render an opinion one way or the other, but subtle expectations can definitely come into play.
OK, let's start with this comment first, as it seems to be basis for your opinion: "It's not uncommon for particular clients to choose those appraisers who best meet their aims." In mortgage lending, Federal law separates loan origination and appraiser selection. Refer to HVCC (now sunsetted, thank God) and the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act. That means no "good old boy" network to get appraisers to come in at a particular value. Both D/F and TILA prescribe strong penalties for attempts to influence appraiser opinion of value. So, which clients do you know that have the loan originators choosing appraisers since that has been against the law since 2010?
As to your question, the three appraisers should come within a reasonable range of possible value for the property. Unfortunately, the required endstate of an appraisal isn't a value range, it is a specific value which, as an appraiser, is rather ridiculous. However, a dollar value is required so a specific dollar value is opined. Remember also that the opinion of value is has an effective date and have a very short shelf-life (normally 120 days or less). Real estate is a dynamic market and the truth changes daily.
I will restate my comment from my previous post in this thread -- the appraiser is the only party in the buying and selling of real estate that is required BY LAW and PRACTICE to be unbiased. Furthermore, there is a certification printed on most of the appraisals forms used to communicate the results of the appraisal wherein the appraiser affirms that the report is unbiased and the appraiser was not influenced in any way in the rendering of the value opinion.
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Face the facts
