Real Estate Appraisals Holding Back Home Sales
According to a survey by the National Association of REALTORS®, Real estate appraisals are one of the issues holding back home sales.
Recent changes to the appraisal process have been causing issues. One of the biggest concerns is the use of out-of-area valuators. Non-local valuators are limited in local knowledge which can produce inaccurate comparisons and even in some situations cause lenders to make excessive demands resulting in delays and cancellations.
"Lawrence Yun, NAR chief economist, said there has been a steady level of appraisal issues for quite some time. “Though the real estate recovery is taking place, the combined issues of stringent mortgage lending requirements and appraisal frictions are hampering otherwise qualified buyers from purchasing a home in a timely fashion, and in some cases are preventing them from buying at all,” he said."
Problems REALTORS® have reported include;
- The use of foreclosures, short sales, and dilapidated properties as comparable homes without appropriate adjustments for property condition and market trends.
- Appraised values are inadequately reflecting market conditions including; increasing prices, bidding wars, and lack of homes on the market.
- Non-local valuators lacking local market conditions, area information, and extended turnaround times due to inconsistent and fluctuating valuations.
While the apprasial industry has been attempting to adapt to market conditions and increase education for more accurate valuations, it is clear that issues still remain. Fortunately, the distressed sale properties are decreasing which should result in less comparisons utilizing below market homes against non-distressed properties to appraise the value.
Until the issues have been addressed, it is important for buyers and sellers to be informed and aware of the problem and practice safe decision making when choosing an appraiser. Be sure to "Think Local" and communicate with lenders and appraisers about any errors or concerns with valuations.