Currently, in our Houston housing market, we are seeing a combination of both lender and appraisal issues that are hurting home buyer and seller transactions. You see, appraisers rely on the previous six months of sales to value a current home sale for the lender. In winter months home prices are usually a little lower than summer months and this past winter they were unusually low because of the market (foreclosures and short sales and the end of the recession.) So now here it is summer and buyers are offering sellers what they want for their homes, which really is the meaning of market value – the amount at which a buyer will pay and a seller will take for a property should be market value. However, after house goes under contract and buyer and seller are happy, the lender orders an appraisal of the property. Many homes are not appraising. The values are based on the last six months of under pricing due to too much inventory and now we have too little and prices are rising. Plus we are now coming out of the recession, it’s summer, and there are fewer foreclosures and short sales. So why can’t the lenders and appraisers see that? It’s a constant battle for the market…all because lenders want to make sure the collateral is there in case the loan goes bad. But really, what difference does it make whether a home selling for $250 appraises at $250 or $245? Or even $240? If the lenders would only give loans to people who can afford them and who qualify, what difference would the value make anyway?
Being in real estate, I do understand that Appraisals are an important part of the process in purchasing or selling a home. But it’s scary that more than ever the appraiser has the power to determine whether or not a sale goes to the closing table. By that point in the sale process, a lot of people have invested time and money in the sale. The Realtor has paid to market and advertise the home to find the buyer. The seller has paid to make repairs and stage the home for showings. The buyers have paid an inspector to inspect the property.
As if it were not difficult enough to value some homes in today’s real estate environment where often there are no comparable sales in the last year or more, the government has stepped into the process to ‘correct’ the abuses in the appraisal system, and the consequences of HVCC are that appraisers are traveling a long distance sometimes and are doing more work for less pay. Even if an appraiser has local knowledge, they may or may not do a thorough investigation of the comparable properties and they may choose to use Comparable Sales that are not ideal. They are so afraid of over valuing the property, that they aren’t valuing it correctly in many instances that I have seen.
In this market, it is imperative that the home owner meet the appraiser when it is time to get it done. The point is not to influence the appraiser in any illegal way, but to give the best information, so that the appraiser can value the property accurately. The homeowner knows better than anyone what the upgrades are and how their property differs from the other homes in the neighborhood. They know what additions they have made and how well they have maintained the home. In my next post I will list my top 10 ways to get a better appraisal in this market. That’s tomorrow’s blog – so check back to find out more!
en cut in half or more. Anything we can do to help is in the sellers’, buyers’, ours, and the community’s best interest.
