1650 E. River Road
How Important is a Home’s Appraised Value?
You hear and see it all the time, “My house appraised for…” or “Just appraised for…” or “Reduced $50k under appraisal.” But what significance does that have? To me, very little. The public gets hung up on appraisals all the time, but the problem is that home appraisals are subjective. The same home can be appraised for a very wide range of values. I have seen some homes appraised for $200k and then re-appraised (sometimes by the same appraiser the same week) for $220k. How could this be? Appraisals are, simply put, one person’s OPINION of what a certain home is worth on a certain date. They have no bearing on what the marketplace will pay. Say your home is appraised for $450k and you list the home at $450k. After six months, the best offer you have received was for $395k. The appraisal was wrong! Your home was, in fact, only worth $395k — NOT $450k.
The only rationale for appraisals is so that lenders can obtain an estimate of a property’s value from an independent, third party. Lenders need verification that the property is actually worth the amount of the loan, for their own protection. When appraisals are ordered, the appraiser is under significant pressure to value a home at the sale price, which is the home’s true value. How better to find the value of something than to see what others are willing to pay for it? But, determining the value before the actual sale is an inherently flawed process.
Now if the appraiser does not bring the appraisal in, then he has:
1) Wrecked the sale for the buyer and seller.
2) Most likely ruined his relationship with the loan officer who can freely choose among appraisers. Next time the officer needs an appraiser, he or she most likely will be using someone else.
3) If the appraisal is for a homebuilder, then, again, that builder will most likely question all appraisals from that individual and try to prove that they are not doing things properly.
It would be an improvement if lenders had their own dedicated appraiser(s), who would work for that lender rain or shine unless it is determined that they are not completing the job correctly. This would at least result in more consistency and accuracy. In the past two years, some lenders have changed their guidelines and now only allow certain appraisal companies and individuals to complete appraisals for the properties they lend on.
August 27th, 2008 at 5:12 pm
A few years ago WAMU had fired all of their in-house appraisers to have a third party company do them because of a lot of controversy. They didn’t even want the appraisers to see the sales contract…I haven’t followed up on the story recently but I know for awhile it was a HUGE issue.
I don’t take appraisals very seriously either, unless they are significantly LESS than the sales price of the home and you are representing a buyer
Sadly for the seller it doesn’t mean whole lot.
August 27th, 2008 at 7:34 pm
Yes for the buyer client a low appriasal usually = a lower price. Unless an experienced and verteran listing agent can fight the appriasal and get the value increased. That’s at least what I would try as the listing agent if an appraisal came in low for the buyer.