For Buyers and Sellers: an insightful look at home appraising

Appraisals say they are only people involved in real estate transactions who don’t have a stakes in the price of a property or whether it sells.

Appraisals are not meant to simply support contracts; they are obtained to help lenders assess their overall risk.

Appraisers say they do not set the value of a property, they reflect it.

A good Realtor will do a comparative market analyst, CMA, before listing or entering a listing/contract price for the buyer.

Lenders and Appraisals would argue, these are subjective opinions, and not one made with the training and requirements needed to be an appraiser. This can be true. May not be subjective, but an honest opinion without the training or certification needed to be an appraiser.   

In 2007, Fannie Mae and Freddie Mac implemented the Home Valuation Code of Conduct of 2009. It required that lenders use a third-party, an appraisal management company, to do the appraisal in order  to keep an arm length distance between lenders and the appraising.

In 2010, the code was replaced by provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 allowed lenders to set their own firms, if not, allowed them to work with appraisal companies, replacing the arm length distance between lenders and appraising.

Some resulted in the following.

  • Homes were being appraised outside the area of the subject house on the market
  • Homes were being appraised by appraisers not familiar to the area of the subject house.
  • Sometimes the person reviewing an appraisal for a lender has less experience than the appraiser does.
  • The Contract between the buyer and seller were at risk.

Contracts were:

  • Canceled, having the appraised value coming in at lower than the priced negotiated.
  • Renegotiated to a lower sales price with the buyer/seller agreeing to a reduce price.
  • New lender was hired.
  • Property was asked to be reappraised

Appraising real estate is not an exact since, and even appraisers do not always agree.    

For a more insightful look, please read the link below:

Copyright © 2012 The Orange County Register (Santa Ana, Calif.) Distributed by MCT Information Services.


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