The Kiss of Death - Low Appraisals

I don’t know why but a couple weeks was the week of low appraisals on properties.  Not our properties mind you, other mortgage companies.  My thoughts?  Sometimes you just get an appraiser that is simply out of his/her league or area.  Other times - the mark is missed just a little because the house is the trendsetter in the neighborhood and there is no data to support what folks are willing to pay.  The challenge with a low appraisal is you can’t recover.  Once a low appraisal has been completed - doubt of the value is set in the buyers minds and if anything has been learned from our 2008-2010 mortgage crisis is that we don’t overpay.  However, are you overpaying?  Maybe - whether you are or are not that first appraisal - that one person’s opinion says yes and now you’re stuck. 

Here is the reality of the appraisal world: 

No one is going to school to say - get me into appraising homes - so we have a shortage of new people coming into the profession.  As lenders tightened requirements and put more responsibility on the appraiser some have simply left the industry.  So we have increasing purchase markets and people buying more, with less people to do the skilled work of the appraisal. The perfect storm. Big Banks will use companies that employ tons of appraisers and with that comes lack of experience and knowledge.  The appraisers usually will give up part of their fee to a third party company so they can get steady work.  The best appraisers in our market don’t need to give up any of their fee to create business, so working with bigger banks is a disadvantage in this area. 

So here is my two cents for the day; when you’re looking at offers the mortgage company matters!  Talk to them about how they choose appraisers and what is the experience level - it can make or break you purchase and sale.  Trust me, we have witnessed it five times in one week and only because realtors are calling us to see if we can save the deal and verify the appraisal.  Come to us first- less pain in the end :)