Real Estate Appraisal’s in the 2012 Real Estate Market

Even for people who have bought a home before, appraisals feel like an enigma.

Why? Because as the real estate market declined and evidence of mortgage fraud were exposed, appraisals were near the center of the controversy. Some appraisers were too liberal and appraised properties higher than they should have. (As we all know, a few bad apples can spoil it for the rest of us)

Today. Now, in 2012 as the real estate market is making improvements, appraisals are hindering appreciation. Here is a list of things to bring you up to speed on appraisals, including the pros and cons:

1) Appraisals are necessary, most banks require them to understand the value of the home compared to the loan amount.  The mortgage lender orders the appraisal but they have no contact with the appraiser. Most appraisals are ordered through appraisal management companies.

  • PRO – This is designed to prevent the appraiser from being influenced by the bank.
  • CON – There is little control on the turn around time for the appraisal and sometimes the appraiser assigned is not familiar enough with the neighborhood/area

2) Appraisers are tending to be conservative on adjustments to the comparable homes in their appraisal reports.

  • PRO – Buyers are getting great deals on homes with lots of upgrades
  • CON – Houses in high demand are sometimes struggling to get the appraisals in as high as the buyers are willing to pay

3) Appraisers are finding not enough comparable sales to use that the mortgage lender will accept.

  • PRO – With increased sales in first quarter of 2012, there will be more comparable sales for the appraiser to consider.
  • CON – Some closings are being delayed until the appraiser can add more information to satisfy the lender

Remember that appraisals are still an important part of the purchase process for buyers who are getting a mortgage. Ask your agent to help you find comparable sales before you go under contract to help prevent any issues before closing.

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