Appraisals are like snowflakes. No two are ever the same.

Possibly one of the more frustrating areas for people in the real estate market is the appraisal process.

It’s not even just those people buying or selling a house currently. But existing home owners who see juicy headline mortgage rates at the bank. Then when attempting to refinance to take advantage of the rates they are frustrated by a super low appraisal.

What’s Happening.

Well one thing that is happening is new guidelines for appraisers jointly adopted by Fannie Mae and Freddie Mac. An excellent run down by Sandy Krestan in the Arizona Association of REALTORS blog.

The changes are called the Uniform Appraisal Dataset (UAD), a lack of uniformity always confuses and frustrates so hopefully this is a good change. So many people are involved with the results of the appraisal, buyers, sellers, mortgage brokers, REALTORS, homeowners refinancing and even the bank underwriting staff are people too.

What Can Buyers and Sellers Do To Avoid Appraisal Frustrations?

The short answer here is not that much. If an appraisal comes in lower than both buyer and seller were expecting it can lead to a bit of an impasse. The buyer was willing to pay more but can’t raise the funds, and the seller believes in the value of the accepted offer.

For sellers price your home fairly to begin with and you should be able to find and accept offers that will appraise. Otherwise you are looking for mainly cash buyers and those buyers tend to be looking for the deepest discounts anyways.

For buyers it can be super frustrating when their bank to refuse to loan above the appraised amount but it can lead to opportunity. The first course of action is to negotiate hard. Get the absolute best deal from the seller. Only after that consider other options like finding cash to make up the shortfall or re-ordering a second appraisal. If you believe the appraisal is significantly lower than comparables show try to present this case to the underwriter as they do make the final decision.

Posted in Market Analysis | Tagged , , , , | 1 Comment

One Response to Appraisals

  1. Terri Chandler-Royse says:

    Hi Marta – great article! Here are a couple of other tips for folks out there. If a bank or lender (the client, in this case) engages the services of an appraiser for a potential mortgage transaction, the results are for the client. The bank would like to know that they will are making a good investment before lending. It doesn’t make good business sense to lend more than the typical buyer is willing to pay.

    I would think that in a scenario in which the appraised value is lower than the offer, a buyer’s agent would have a great opportunity to gain their client’s loyalty for life! “Mr. & Mrs. X, it’s time for us to renegotiate, as I would hate to see you pay more than the property is worth.” At that point, if they are not interested in using the principal of substitution (I can probably go down the street & pay less for a similar product), and the sellers are standing firm on their asking price, well… then they must find additional funds.

    A great way lots of agents have helped their clients determine a list price is by ordering a pre-listing appraisal. These are performed on General Purpose forms & are not the same as a URAR used for lending purposes. I would think a $400 investment on the front end would save months (and dollars) of ‘chasing the market’.

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