Appraisers Seen As Another Obstacle For Buyers
It’s not news that the real estate market in most of the country is going through a rough period. Banks and other lenders have raised their standards when it comes to deciding who they will loan money to, making it more difficult for many buyers to get into the home they desire. Falling home values make matters worse and also make sellers and listing agents attempt to squeeze as much as they can from every sale. Even getting a buyer to make an offer that is attractive to the seller is no guarantee that the sale is a done deal. These days, the grim reaper that can swoop in and kill off a deal goes by the name “appraiser.”
Before a lending institution will approve a mortgage to purchase a home, they have to know that the home is worth what the buyer is offering to pay. That’s where the appraiser comes in. The bank hires the appraiser to visit the home and give their professional opinion regarding the value of the home. For example, say that Bob and Sally Seller have listed their home for sale for $249,000. John and Jane Buyer come out to look at the property and fall in love with it.
John and Jane make an offer to purchase the property for $245,000 and Bob and Sally, whose home has been on the market for over a year, reluctantly agree because they’re worn out after having their home on the market for so long and they just want to move. Fortunately, John and Jane have good credit and have already been pre-approved to borrow up to $250,000 for their mortgage, but they don’t have a whole lot of cash on hand. That new SUV they bought last year didn’t leave much room in the budget for savings.
Everything appears to be going swimmingly and Bob and Sally expect to start packing in the near future while John and Jane are getting very excited about the idea of moving into their new home.
Along comes Arnie Appraiser who has been hired by the bank that pre-approved John and Jane for a $250,000 mortgage. The problem is that Arnie determines that Bob and Sally’s house is worth only $230,000 in the current market. The bank will not approve a mortgage for the amount of $245,000 if the value of the house is only $230,000 and without savings, the deal is in deep trouble. Unless Bob and Sally dramatically lower their price or John and Jane can somehow come up with an extra $15,000 the deal is dead.
This is a big disappointment for Bob and Sally, John and Jane and the real estate agents involved since they surely could use the money in this slow market. Unfortunately for Arnie, he comes out looking like the bad guy. As far as all the other parties are concerned, it was Arnie that killed the deal, but he’s just doing what he’s paid to do and as unfortunate as it is, he really can’t be blamed for just doing his job. If he gives the bank an inflated number, it’s going to jeopardize his ability to get more work from that bank in the future since they don’t want to end up dishing out $15,000 more than the home is worth. Leaving the bank with the impression that he’s not a competent appraiser will not be good for Arnie’s job security.
With situations like this playing out all over the country, it’s easy to see how a rift can be opened between appraisers and real estate agents. Some agents are blaming appraisers for prolonging the lousy state of the real estate market since the low appraisals are killing deals that would have otherwise gone through. Like any other market, the real estate market needs a bit of a kick-start of activity to get it going again, and some real estate professionals believe that there would be a better chance of seeing a revival of the market if more sales were being generated.
Any bad blood between appraisers and real estate agents is likely to be forgotten some day when the real estate market recovers and things return to “business as usual.”
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