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Are Low Appraisals Still Hurting the Housing Market ?

by Administrator on Dec 14, 2014 Market Conditions Articles 1317 Views

If you are a real estate agent and an appraiser, like I am, you get to see and hear a lot more than most appraisers relating to what real estate agents are thinking and saying though their newsletters and trade articles, and it's clear to me in late 2014 real estate agents are still unhappy that some portion of their deals are not being appraised at their negotiated sales price. 

Agents don't often look beyond the fact that the deal or deals that their current deal does or does not reach the needed appraised value.  They are not concerned that there is no support in the market for a negotiated price, it's just sufficient that the seller and the buyer agreed to the price.  The definition of market value used as the basis for most appraisal reports talks about the most probable price being sought.  A seller and his agent always try to get the highest possible price for a home and when they are successful they create their own appraisal problem since they may have negotiated a deal well beyond the most probable price.

Pre-2007 the banks may have loaned money on a home that was negotiated at a price 10% higher than the highest sales price paid, or above the appraised value, because lending the money back then had a lot to do with a borrowers track record / credit worthiness and less to do with the value of the asset itself.  Since then banks have tightened up and generally loan less money to individuals with higher credit scores and they rely more on appraisals to "hold the line." 

It's easy for agents, looking to blame someone for their failed deals, to blame appraisers.  It's not that some of their markets have not returned and they are still struggling due to things like continued high unemployment, masked by government under reporting, falling real incomes and continued short sales and foreclosures.  It's not that the banks are stricter about making loans and that many fewer are approved.  The theory of agents is that the appraisers are responsible with their antiquated, biased methods that don't consider pending sales (especially those that will never close).

From an appraiser's perspective it's ridiculous that we are still being blamed for low market prices.  The statistics, like those on the Las Vegas market, say it all.  The market price of a home has risen to a median sales price of about $ 180,000 in 2014 from a low median sales price of about $ 110,000 in 2012.  While everyone knows that it's an improvement how many people, owners and agent, desperately want the median price to get closer to its 2007 peak of $ 306,000? 

I know that I for one would love to see the median sales price of homes in Las Vegas come back to a price much closer to its high, but it has been 7 years since those high prices, and it doesn't appear that we are moving quickly in that direction.

So agents need to realize that appraisers understand the plight of their owner / clients many of whom have lost their homes through foreclosure, renegotiated their mortgages or sold short their homes.  Appraisers understand that many owners are still struggling with large mortgage debt and that Trillions in equity has been lost. 

It's not like appraisers didn't live through the debacle themselves because they did and many of them are in the same boat with their own homes as other owners who are underwater paying on debt that is not supported by equity. 

Real estate appraisers do not however make the market, their market value opinions are formed based on actual sales data not on their want or need to see prices increase.  So agents should lighten up on appraisers and find another group of people to blame (like maybe the real culprit, the banks).

For more appraisal information contact Glenn Rigdon, MA, MRICS, ASA a Las Vegas / Henderson Nevada appraiser via email or via his business website Horizon Village Appraisal (http://www.horizonvillageappraisal.com), or you can also click on “Contact Us” on the home page of this website.

Article source: http://www.appraisalarticles.com/General-Appraisal-Articles/Market-Conditions-Articles/4522-Are-Low-Appraisals-Still-Hurting-the-Housing-Market.html

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