In his column in the Sunday, June 24, 2012, issue of the Los Angeles Times, “Low appraisals that don’t reflect rising markets are ruining deals,” Kenneth R. Harney discusses the very real and disturbing trend of low appraisals in an upward-trending real estate marketplace. Cautious on behalf of lenders and answerable to appraisal management companies, appraisers are turning in values below those reflected by market activity.
Accurate real property appraisals are critical to both sellers and buyers. A low appraisal means that the buyer may not get the necessary loan and may have to put down additional cash to cover the gap between the appraised value and the selling price. Or the buyer might just walk away from the sale.
As Harney suggests, appraisers are slow to respond to the shifting marketplace. One of the first signs of changing market conditions is the return of multiple offers. We tend to see multiple offers in two situations: first, when a property is priced so attractively that it draws a large field of interested buyers, and second, when the available inventory drops so low that buyers become desperate and start competing for those that remain. In either case, multiple offers can drive up the selling price by tens of thousands of dollars.
If appraisers fail to take into account the signs of improvement, such as multiple offers and other “positive trends that affect value—pending home sales and new listings of similar houses at higher prices, for example,” their low numbers can have a dampening effect on the market.
As the basis for establishing price and for getting on-target appraisals, accurate, timely information on comparable properties is critical. The Sanborn Team puts the highest priority on providing reliable comparables; we work closely with appraisers to assure that our client’s property reflects real market value. We know that a transaction may hang in the balance.
(And by the way, The Sanborn Team loves multiple offers and knows how to set prices that will attract large numbers of qualified buyers.)
When you need expert representation for the purchase or sale of real property through probate, trust or conservatorship, call The Sanborn Team: 310-777-2858.