Are Low Appraisals Stalling A Real Estate Recovery?
According to a recent survey conducted by the National Association of Realtors (NAR) 11 percent of realtors were forced to cancel a contract because a home was appraised at a value lower the negotiated price. You’ll need one of the best real estate agents to get you the price you want, that’s why Real Estate Agent Winston Salem offer you affordable prices.
s Another 15 percent said that they renegotiated to a lower sale price, while 9 percent said a contract was delayed due to a appraisal that was lower than expected. Some real estate experts are worried that the trend in low appraisals could continue and cause a downward spiral in home prices. While some buyers may be pleased that a home they’ve been eyeing is a little more affordable, a low appraisal could spell disaster for sellers, especially if they have very little or no equity.
According to some analysts, one of the problems is the Home Valuation Code of Conduct (HVCC) which prohibits Fannie Mae and Freddie Mac from having direct contact with appraisers. The new set of rules was put into place because inflated appraisals during the real estate boom in South Carolina is said to have partly caused the foreclosure crisis. Since appraisers are paid a fee for each property appraisal, there is pressure to do as many as possible. Below are two problems the new rules may be creating:
- Inaccuracy. Since speed is the order of the day when conducting appraisals for a flat fee, there is a lot more room for errors. Some appraisers may not even visit the property, so they can’t assess the value of things such as home improvements and additions they don’t know about.
- Improper comparisons. Inexperienced appraisers may use distressed properties when searching for comps, even if the home they’re appraising isn’t distressed. This happens because the new rules may require that the appraiser use 8 – 10 comparable properties when doing valuations. In the past, an appraiser could calculate property value with only three comps. To meet the new requirement, the appraiser may mix distressed and non-distressed properties. This is especially harmful to accuracy if the appraiser fails to adjust for the property’s condition and market changes.
Because some buyers and sellers are unaware their rights, they’re often unwilling to challenge an appraisal or to take action to avoid trouble in the first place. Below are a few things buyers and sellers can do to improve their chances of getting a fair appraisal:
- Insist that your lender hire an appraiser who is familiar with your city/county. Hiring an out-of-town appraiser increases the chance of errors.
- Insist that the appraiser hired has a residential appraisal certification. Since you’re paying for the appraiser, you don’t want to be stuck working with amateurs.
- If you’re a seller, make sure you’re present when the appraiser inspects the property and be ready to share anything you know about the home’s value. Don’t accept drive-by appraisals, especially if it will lower the home’s value.
- If you’re the seller, don’t be afraid to give the appraiser a copy of the property’s prelisting appraisal.
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