Home prices continue to push higher than any time in history; yet real estate appraisals continue to be a problem. Low appraisals despite record appreciation? How is this possible with next to no low inventory, ravenous buyers and bidding wars? As it was just over a decade ago, the disconnect between appraisers, agents and the public remains. This time the economic conditions are different and the public has more exposure to data but the appraisal process remains a mystery.

The Role of the Appraiser

The appraiser represents the buyer’s lender; they do not work for the buyer, the seller or any agent. Their job is to ensure that if the lender has to foreclose on the property, the amount they lent to the buyer can be recovered. Appraisers follow standard underwriting guidelines when preparing reports. While the broad requirements are similar, specific loans have different appraisal requirements; conventional, FHA, VA, and USDA. Appraisers have no vested interest in the transaction, there is no motivation to “kill a deal” and in fact, coming in below contract price often results in additional work. The role of the appraiser is hardly a mystery.

Public Sites, Case-Shiller & Social Media

Everyone is an expert, at everything. The challenge is that to be a legitimate expert requires more than 15 seconds reading a tweet, listening to a headline or cruising Facebook and NextDoor. Homes are unique; they are not books on Amazon. Case-Shiller national reports have ZERO similarity with detailed local analysis; home values are up across the board. In fact, some markets are flat or slightly below where they were two years ago. Zestimates are ridiculed when the owners think they’re low and celebrated when they fit the narrative. Appraisers don’t live on click bait headlines; they dig into the comparable data and provide an unbiased opinion of value based upon comparable data.

The Exhausted Buyer

Buyers are shot, done, finito. In many cases, the idea of finding the right home at the right price has been replaced with just finding any home  at any price. Many buyer agents are similarly shot; looking at homes all day, getting back in and finding that most are already under contract before their buyer can act. This can/does result in problems. Overbidding to “win” is common. Eliminating due diligence and waiving contingencies is seen. Agreeing to cover appraisal shortfalls is seen. If a buyer does that in addition to paying 15-20% above list, is an appraised value below contract really a surprise? Many buyers are going to cry when it’s time to sell, acting on emotion may be understandable but it’s likely to hurt.

The Fortunate Seller

Sellers of well-presented homes in strong markets are calling the shots, at every level. They have what everyone wants – and they also have the most issue with appraisers…if one is even needed. Sellers love cash offers for obvious reasons. Next best is a buyer willing to waive most or all of any potential appraisal shortfall. FHA/VA/USDA buyers are having a rough go of things as there are limits to what options they can offer, sellers consider them last. In the end, some appraisals fall short. Listing agents can be helpful with info that the appraiser can use. Agents are not helpful when legitimate data is ignored, nonsense data is pushed as credible or they retreat to the “appraiser doesn’t understand this market” nonsense. If that’s the case, take charge with credible data.

The Rest of the Story

The madness of later 2020 and early 2021 is already factored into the MLS and data systems. Those cash deals and motivated buyers pushed the market and appraisers have those comps as/if needed. However, the comparables used in the reports must actually be comparable. Agents love to simply pick from the top and ignore things that don’t fit the narrative. Same for market conditions; not every market segment is appreciating at 15% a year; some are appreciating less, some not at all. Appraisers mine the data without the emotional connection of the buyer and seller. The idea that any home can be listed for any price might be true but the appraiser isn’t going to be subject to the hype and headlines of the day. The market is the best indicator of value and appraisers are sensitive to that, however underwriting guidelines mandate data considered and how reports are written. In the end, everyone is offering an opinion of value from their perspective subject to the parameters placed upon them. Sometimes they differ.

The Hank Miller Team puts 30+ years of full time sales & appraisal experience to work for you. Act with complete confidence & make sound, decisive real estate decisions. 678-428-8276 and info@hmtatlanta.com

Posted by Hank Miller on


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