WASHINGTON – Sept. 13, 2011 – The National Association of Realtors® (NAR) reports that 16 percent of real estate professionals surveyed in June reported a cancelation in a sale, mostly due to a large number of low appraisals.
Many real estate professionals are watching deals unravel, with some appraisals coming in 10 to 20 percent – or even more – below the accepted offer.
“Over the past decade, finding ‘comps’ that accurately reflect values has been a challenge as values rose quickly during the boom and fell just as fast during the bust,” according to a recent article by RISMedia. “Discounts paid for foreclosures and short sales have created a dual price structure between ‘normal’ and distress sales.”
Obviously one of the easiest solutions when a low appraisal comes in: Ask the seller to agree to a lower price. But when that doesn’t work, consider the following tips:
Research
If clients feel the appraisal was completed incorrectly, they have the right to a copy of the appraisal from their lender, including who performed it and what comparables were used. For example, a client can find out where the appraiser is based (maybe it was an out-of-town appraiser who was unfamiliar with the area). If an out-of-town appraiser unfamiliar with the local market does the appraisal, clients can demand a new one.
Also, a client should evaluate the comparables used in the appraisal. If a client feels that the earlier home sales do not fairly compare to the home they wish to buy, they can ask their real estate agent to pull together a fairer list of recent comparable sales – or possibly even pending sales – to justify the agreed-to-sales price. That information should then be submitted to the loan’s underwriter when asking for a review of the appraisal.
Request a new appraisal
If clients feel the appraisal wasn’t done fairly or accurately, they can ask their lender for a new appraisal. A lender has the ability to override an appraisal estimate, though that’s unlikely. The lender could, however, order a new appraisal, which is more likely.
Get an independent appraisal
Clients could opt to get their own appraisal. (If the loan is an FHA loan, they should ask the lender for a list of approved appraisers.) The bank will generally review the appraisal and ask the previous appraiser if they agree or disagree with the new one. Banks may request yet another appraisal, or they could reject a private appraisal altogether. However, the first appraiser could agree with facts in the independent appraisal and return with a better price.
Source: “5 Ways to Fight a Low Appraisal,” RISMedia (Sept. 7, 2011)
Many real estate professionals are watching deals unravel, with some appraisals coming in 10 to 20 percent – or even more – below the accepted offer.
“Over the past decade, finding ‘comps’ that accurately reflect values has been a challenge as values rose quickly during the boom and fell just as fast during the bust,” according to a recent article by RISMedia. “Discounts paid for foreclosures and short sales have created a dual price structure between ‘normal’ and distress sales.”
Obviously one of the easiest solutions when a low appraisal comes in: Ask the seller to agree to a lower price. But when that doesn’t work, consider the following tips:
Research
If clients feel the appraisal was completed incorrectly, they have the right to a copy of the appraisal from their lender, including who performed it and what comparables were used. For example, a client can find out where the appraiser is based (maybe it was an out-of-town appraiser who was unfamiliar with the area). If an out-of-town appraiser unfamiliar with the local market does the appraisal, clients can demand a new one.
Also, a client should evaluate the comparables used in the appraisal. If a client feels that the earlier home sales do not fairly compare to the home they wish to buy, they can ask their real estate agent to pull together a fairer list of recent comparable sales – or possibly even pending sales – to justify the agreed-to-sales price. That information should then be submitted to the loan’s underwriter when asking for a review of the appraisal.
Request a new appraisal
If clients feel the appraisal wasn’t done fairly or accurately, they can ask their lender for a new appraisal. A lender has the ability to override an appraisal estimate, though that’s unlikely. The lender could, however, order a new appraisal, which is more likely.
Get an independent appraisal
Clients could opt to get their own appraisal. (If the loan is an FHA loan, they should ask the lender for a list of approved appraisers.) The bank will generally review the appraisal and ask the previous appraiser if they agree or disagree with the new one. Banks may request yet another appraisal, or they could reject a private appraisal altogether. However, the first appraiser could agree with facts in the independent appraisal and return with a better price.
Source: “5 Ways to Fight a Low Appraisal,” RISMedia (Sept. 7, 2011)
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