In an effort to change the perception that real estate
appraisers are not valuing homes fairly, the appraisal institute put out a one
page article to counter the argument being made by Real Estate agents,
Homebuilders, and Homeowners who have blamed a part of the market’s distressed
condition on the appraisers.
The President of the Appraisal Institute says agents and
sellers who blame the real estate appraisers for delaying the recovery of the
market by producing opinions of value that don’t match a home’s listing,
contract, or sales price are just plain wrong. No one should be pointing the
finger at them if it turns out that the house they are trying to sell or buy is
worth less than what they thought it was.
She also said that the Appraisers’ clients are lenders, not the buyers
or sellers. They are independent, third-party experts with no motive to be biased.
I’m going to have to disagree with the last part of that
Over the past year, several of my buyers contracted to
purchase a home that all parties felt was worth the asking price, only to find
that the appraiser valued the house for less than what was agreed to. After
reviewing these appraisals and the comparable sales used, it was obvious to
everyone that the appraiser had selected the lowest sales in the area to
determine the value. There were homes that sold for more that were similar to
the property being purchased, but those were not used in the valuation.
After questioning the appraisers as to why the higher comps
were not used, it became obvious that there was a reason they were using the
lower comps. Though none of them will admit it publicly, they are concerned
about losing business from banks by appraising homes too high.
These appraisers said (off the record) that bank and
mortgage company loan underwriters are reviewing the appraisals, looking at
neighborhood comps themselves, and questioning the appraiser’s use of some
homes when arriving at a value over others
that were sold at a lower price. I was told by one appraiser that if
they were questioned on several occasion by the underwriters for using sales
that were not to the underwriters satisfaction, that they would be removed from
the list of vendors to use.
It seems to me that would create a motive for a biased, low
The paper went on to say things like “Don’t shoot the
messenger”, or “There’s no reason to assume the contract price is the “correct”
price simply because it’s higher than the appraisal.” It blamed owners for
believing their house was worth more than what it truly is and realtors for
over pricing the home.
In some cases that might be true ,but it’s also obvious that
some appraisers are choosing to use the lowest comparable sales in a
neighborhood when higher, similar sales are available and it does seem to
confirm what some appraisers have said to me. Job security can be a factor when
the value of a home is being determined in today’s market.