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Just had an appraisal come in on a property where I am representing the buyer. I have to say, this was the worst one I've seen in my career. On one of the comps he had the wrong sale date, and the wrong picture on one of the others. Just really bad.
No, it does not make sense. It's like saying, value this stock. Oh by the way I found this 1 guy who will pay $X. Now, tell me a fair price, and oh, of if the price is too low and the buyer cannot get financing, then perhaps I will use another appraiser.
Appraisers are incentivized to keep their job, which means making Realtors and Banks happy.
That is the most idiotic thing I have heard in a while.
Just had an appraisal come in on a property where I am representing the buyer. I have to say, this was the worst one I've seen in my career. On one of the comps he had the wrong sale date, and the wrong picture on one of the others. Just really bad.
But did it hit your value? I am guessing not because otherwise you wouldn;t be griping.
What Rakin said is pretty accurate. In addition some appraisers are good, some are not. The appraisers aren't telling you what they think market value is, they are only telling the bank it's worth (or not worth) what the buyer is paying.
There are some ignorant comments on this thread. And while I know that last comment is going to offend some people the definition of ignorant is uninformed, not stupid. I don't see anyone on this thread that is stupid, just uninformed. So I'm saying there are some uninformed comments on this thread.
Brandon, a lender was in the office this morning teaching a class and one of the things discussed was "Red Flags" for automated underwriting. (much like the IRS).
One of the major red flags he mentioned is a large over value in price above the sales price. This can cause the loan to be kicked out of the system and the Appraiser then has to justify why such a large variance. He said most appraisers are smart enough to keep it within a tolerance where it's accepted by underwriting.
That is the most idiotic thing I have heard in a while.
Why? If your appraisal kills a sale, do you think the same Realtor will recommend you?
If you're working with the banks, do you think they will recommend you? The banks get paid by writing loans, not by rejecting qualified, pre-approved applicants because an appraisal (which is a judgement call anyway) comes in low.
A coworker bought a house in Hoboken, NJ. His 1st appraisal was $40K less than his agreed upon purchase price. He then got a 2nd appraisal that was $20K more than his purchase price. He ended up giving that one to the bank, got his home and is living there.
My question to you: What was his house worth when he bought it? What he paid, $40K less, or $20K more? Since it's a free market and he was willing to pay what he offered, that's the most logical price. In fact, that will be the "comp" for the next house in the neighborhood.
Why? If your appraisal kills a sale, do you think the same Realtor will recommend you?
If you're working with the banks, do you think they will recommend you? The banks get paid by writing loans, not by rejecting qualified, pre-approved applicants because an appraisal (which is a judgement call anyway) comes in low.
A coworker bought a house in Hoboken, NJ. His 1st appraisal was $40K less than his agreed upon purchase price. He then got a 2nd appraisal that was $20K more than his purchase price. He ended up giving that one to the bank, got his home and is living there.
My question to you: What was his house worth when he bought it? What he paid, $40K less, or $20K more? Since it's a free market and he was willing to pay what he offered, that's the most logical price. In fact, that will be the "comp" for the next house in the neighborhood.
I know you didn't ask the question for me, but I'll take a shot at it since I'm an appraiser.
I don't care of a Realtor recommends you, since I know of no appraisers that ever rely on Realtor recommendations.
I've done many appraisals that have "killed" a sale or deal. In the long run, banks appreciate that I do, and I have been thanked for doing so after the fact in certain cases. These banks in fact do recommend me as a result, since they feel that I protected them from making bad loans.
Borrowers are not allowed to pick and choose their appraisers. So your comment about the coworker "giving that one to the bank" is illegal and essentially does not happen, and hasn't happened since the 1980's. Sounds like something you made up.
If your last statement was true, appraisals wouldn't be necessary. You should suggest that to your lender next time you apply for a loan and see how far you get.
First of all, the vast majority of appraisals for lending purposes are ordered through appraisal management companies. So it's very rare for the lender or loan officer to even be in contact with the appraiser. In our state, there are severe penalties for coercing an appraiser. So very few appraisers have any concern about being influenced by outside people.
Insofar as the appraised value coming in close to the sales price, there's a lot that can be said about that. For the sake of brevity, the first step is the appraisal process is to identify the problem. This is essentially the information that the client is seeking. So in the case of a house sale the lender is bascially asking the appraiser if the property is worth the contract price.
Most appraisers realize that most properties have a range of values, yet Fannie & Freddie require a single point estimate. So an appraiser may finish his appraisal and have an indicated range of $295,000 to $305,000 yet be forced to narrow that range down to a single point. The appraiser then looks at the contract price to 'answer the client's question' and determines whether or not the contract price falls into that range. If so, then the reconciliation may reflect that. That creates a situation where the reconciliation is likely to favor the contract price so long as the range of value encompasses that contract price. That's why in situations where the contract price is supported by the range of value that the final opinion of market value ends up close to the contract price.
By the way, the requirements for a Certified Residential appraiser require a college degree, 200 hours of coursework, and 2,500 hours worth of experience that can be obtained in no less than 2 years.
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