Posted on: 05th Dec, 2009 01:42 am
Low appraisals may happen irrespective of any market situation. However, the most important reason for a low appraisal can be the down turn in prices of the property. Let's check out some of the reasons why the appraisal can be low:
There are a number of reasons why appraisals may come in low. Some of them include:
There are a number of reasons why appraisals may come in low. Some of them include:
- Overpricing by the seller.
- An appraiser who is inexperienced and doesn't understand influences on value.
- Incorrect evaluation by the underwriter.
- Inflated prices as a result of the multiple offers.
- Seller gives cash back to the buyer which makes the lender believe that the price has been inflated.
Apart from the reasons Sara has mentioned in her posts, there are few other reasons which may also lead to a low appraisal. Let's check out what they are:
Few buyers: The value of the property may decline because there are fewer buyers shopping for the property and homes are larger in number. Thus, the appraisal may come low.
Wrong comparables or pending sale data: It can happen that your appraiser overlooked the pending sale data. This may result into higher comparable sales. Also, it can happen that the appraiser used comparable from a wrong neighborhood to appraise your property. This may also lead to a lower appraisal of your property.
Foreclosure and short sale: Property values decline due to the increase in foreclosure and short sale in the neighborhood. Apart from this, the appraisal may come low if no comparable sales exist.
Few buyers: The value of the property may decline because there are fewer buyers shopping for the property and homes are larger in number. Thus, the appraisal may come low.
Wrong comparables or pending sale data: It can happen that your appraiser overlooked the pending sale data. This may result into higher comparable sales. Also, it can happen that the appraiser used comparable from a wrong neighborhood to appraise your property. This may also lead to a lower appraisal of your property.
Foreclosure and short sale: Property values decline due to the increase in foreclosure and short sale in the neighborhood. Apart from this, the appraisal may come low if no comparable sales exist.
Low appraisals; all reasons stated above are plausible and valid; supply and demand has always been, will remain a factor of value. Hardly rocket sciene, economics 101. An excess or oversupply of any commodity be it oil, dollars, homes, will result in lower prices; Remember those plasma flat panel TVs that once sold for thousands can be now obtained at a fraction of their cost. Bubbles, windows of opportunity open for only so long before the extradionary, becomes common, and ordinary.
All situations must be taken individually. Like anything in life, even appraisals, there are those that are excellent, mediocre and some sub par. Results are often factors and subject too amount of training, exeperience, knowlege of subject matter.l
Pending sales are offered for demonstrative purposes, listing are for purposes of substitution, but not given greater weight in the reconciliation. A sale pending or listed is not closed until its closed. Underwriters are given their instructions and usually follow them to the letter.
Bottom line reailty is that lenders are terrified of lending a dollar today, only to have it worth a dime tomorrow. They have taken their bags of gold and secluded themselves Do not disturb sign on the doorknob, as they huddle, not nearly even beginning calculating their true losses Those outside banging are falling on deaf ears.
What exactly, is defined as a low appraisal. It would be, relative, to what?
All situations must be taken individually. Like anything in life, even appraisals, there are those that are excellent, mediocre and some sub par. Results are often factors and subject too amount of training, exeperience, knowlege of subject matter.l
Pending sales are offered for demonstrative purposes, listing are for purposes of substitution, but not given greater weight in the reconciliation. A sale pending or listed is not closed until its closed. Underwriters are given their instructions and usually follow them to the letter.
Bottom line reailty is that lenders are terrified of lending a dollar today, only to have it worth a dime tomorrow. They have taken their bags of gold and secluded themselves Do not disturb sign on the doorknob, as they huddle, not nearly even beginning calculating their true losses Those outside banging are falling on deaf ears.
What exactly, is defined as a low appraisal. It would be, relative, to what?
It really all comes down to the recent comps in the immediate area. The second most important factor is the condition of the home in question compared to the ones on the comps.
There is no need to get disheartened if your property appraisal comes low. There are solutions to it and it's you who need to take the right decision. Check out some of the ways to deal with a low appraisal:
- Offer lower price: As a seller, you can offer a lower price to the buyer if the appraisal comes very low. This is also a good option to consider if there was an inflated appraisal earlier or the property was overpriced. This will help you to successfully complete the deal as the buyer would be encouraged to buy the property.
- Second appraisal: If you're not satisfied with the appraisal results, you can always apply for a second appraisal. If you've a conventional loan, then the Home Valuation Code of Conduct (HVCC) will come into effect. If you find that your appraiser is not familiar with the local market, you can ask your lender for a local appraiser. If you've a FHA loan, then you can ask for a list of appraisers approved by FHA from your lender. The seller or the buyer can finance the second appraisal to check out the value of the property.
Most loan officers do not understand Ethics and Appraising and expect Appraisers to do things that are illegitimate. If you want to learn about what Appraisers can and cannot do, join LinkedIn com (free) and become a part of the USPAP, Uniform Standards of Professional Appraisal Practice Group (also free) on LinkedIn(dotcom). What have you got too lose, other than your possible misconceptions?
We have 597 members now and growing. Our members include more AQB Certified USPAP Instructors than any group I am aware of, with the exception of The Appraisal Foundation itself. We also have multiple people in leadership from The Appraisal Foundation, the Appraisal Section of NAR, NAIFA, AI, FannieMae, Freddie Mac and numerous regulatory Appraisers and investigatory Appraisers, truly a unique mix. In addition to those there are many other Appraisers, lenders, AMC representatives, Appraisal school representatives and others with an interest in USPAP and what it is we do.
We welcome your participation and comments, so we might learn from you and share with you our collective knowledge and experiences.
Do you know what constitutes acceptable versus unacceptable business practices? This is required in all 50 States. Follow this link... uspap.org/2010USPAP/eUSPAP2010.htm (see advisory opinion 19) Giving a comp check without an Appraisal IS BANK FRAUD.
Ethics? Do you understand them? Follow this link to learn more about what an Appraiser is required to do and what not to do. uspap.org/2010USPAP/eUSPAP2010.htm
We have 597 members now and growing. Our members include more AQB Certified USPAP Instructors than any group I am aware of, with the exception of The Appraisal Foundation itself. We also have multiple people in leadership from The Appraisal Foundation, the Appraisal Section of NAR, NAIFA, AI, FannieMae, Freddie Mac and numerous regulatory Appraisers and investigatory Appraisers, truly a unique mix. In addition to those there are many other Appraisers, lenders, AMC representatives, Appraisal school representatives and others with an interest in USPAP and what it is we do.
We welcome your participation and comments, so we might learn from you and share with you our collective knowledge and experiences.
Do you know what constitutes acceptable versus unacceptable business practices? This is required in all 50 States. Follow this link... uspap.org/2010USPAP/eUSPAP2010.htm (see advisory opinion 19) Giving a comp check without an Appraisal IS BANK FRAUD.
Ethics? Do you understand them? Follow this link to learn more about what an Appraiser is required to do and what not to do. uspap.org/2010USPAP/eUSPAP2010.htm
More often than not the problem is lofty expectations on the part of the person getting a loan. Most Appraisals done correctly are based on the market and represent market value. With very few exceptions values nearly everywhere have gone through the floor and for many people with low down payments, like under 20 percent, they find them selves upside down and that is more normal than not. Don't blame the messenger for telling you the truth.