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Unrealistically Low Appraisal Values in Up Markets a Problem

Each month, the National Association of REALTORS® obtains up-to-date and on-the-ground incisive comments from REALTORS® who participate in the REALTORS® Confidence Index (RCI) survey. The RCI survey tracks expectations about overall market conditions, buyer/seller traffic, price, buyer profiles, and issues affecting real estate: http://www.realtor.org/reports/realtors-confidence-index.

The selected comments reflect the general sentiment expressed by REALTORS® who participated in the October 2012 survey, conducted during October 22 through November 5, 2012. All real estate is local and conditions in specific markets may vary from the national trend.

Appraisal Issues
REALTORS® continue to report that unrealistically low appraisal values continue to jeopardize sales. Appraisal values are in some cases affected by REOs which in some cases are reported as being used as comparable properties. In other cases, appraisals are reported as not keeping up with the market. Also, there continue to be reports of appraisers having poor knowledge of local conditions as they come from outside areas (in some cases as far as 100 miles according to one REALTOR®).

  • “Appraisals and BPO values are likely low because of the sort of comps that are available on the market. REO properties and lower value sales comprise the bulk of market activity which in turn leads to low appraisal and BPO values.”
  • “Appraisals are definitely a problem. We are in a Vacation, second home area and we are getting appraisers from 100′s of miles away to appraise Lake Property. They don’t understand the values.”
  • “Buyers are coming in with cash to close the gap between low appraisals and sellers sticking to their house price.”
Comments
  1. Robert Horvath

    We are in a market wihere the are few homes for sale. Homes are being put up for sale at prices higher than before the 2005 to 2007 period. Just to get a listing a real estate person is adding $100,000 to $200,000 to the price of the home. Buyers are paying 20 to 25% more for a home than 5 months ago. Maybe we should require all real estate persons to be educated as appraisers before we allow them to go out into the field. Two cases at point. A condo development had two sale within the last 11 months of $600,000 and $605,000 and a new listing was priced at
    $711,000. Thats an increase in value of 18.4%?? In another case a buyer paid
    $435,100 for an old house and the lister put it on the market 6 mos later for
    $599,000, almost 27% higher with no improvements.