I am writing this post as a sideline to Kim's article posted yesterday on this blog "FSBOs - Do You Really Save Money In The Long Run." In that article she mentions the FSBO property potentially not appraising for the sales price. And that started the gears churning for this post.
From the Realtor perspective, I have had the opportunity to work with some really good appraisers and then some others that I had to question their integrity and professionalism. For many, appraisals are the "law" as to the value of a home. For others, they don't put any faith whatsoever in an appraisal, stating "They just say what the bank wants to hear."
Recently, I had an online discussion with a gentleman in Chicago who could not even get an appraiser to come to his home to do an appraisal, because it was for the purpose of determining a listing price. The appraiser told him, "I don't do that." In fact, three appraisers told him, "I don't do that."
Here is the scary thing about the appraisal process...
Your appraisal is only as good as the appraiser, and when used for the correct purpose. The individual appraiser is a HUGE component in the process. I say that because there is tremendous pressure in some cases for the appraiser to "hit a number," or risk not getting future business from the lender.
Quoting Chris Pummer from Marketwatch:
"The 2007 National Appraisal Survey released in December said 90% of the 1,200 appraisers surveyed reported feeling pressured to restate, adjust or change values, up from 55% in the first such survey in 2003."
The above mentioned Marketwatch article says this:
"Another dubious practice spawned by today's sales slump: Citing comps close to six-months-old -- the limit by law -- and ignoring recent ones that would show a local market's sudden turn for the worse."
Do not misunderstand, we have some very good appraisers in the area. There are some that I know and use or have used that are as honest as the day is long.
Here is the reason that I am writing this article. I have recently encountered some sellers who had their property appraised, then wanted to list at that appraisal price. Even if the appraisal is sound and honest, often they do not reflect the change in market conditions. Most homes will not sell now, for the same value they would have 6 months ago, and often we are looking at 6 month old comps in an appraisal.
In a "For Sale By Owner" scenario a buyer may pay a lot more than the true, current market value of the home. In some cases, the price is so high it won't appraise for the value anyway. In others, as I saw recently, a FSBO home appraised for $45,000 more than the home will bring in the current Fredericksburg Real Estate market. If a buyer purchases that home as a FSBO at that price, they just lost $45,000... based on an appraisal.
So, how good is your appraisal? Just food for thought...
Jeff Edmisten
The Edmisten Home Selling Team
Keller Williams Realty
You can reach Jeff Edmisten via email or by visiting The Edmisten Team website.
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