The Prelude: I remember in 2007 when the market started it's decline and housing values began to fall throughout Atlanta. Appraisers were the first to see it and our appraisals reflected the lowering values. Understand, this was before declining values were even on the American consciousness, much less daily news reports on radio and television. I heard the phrase "But they PAID more than that for the house 3 years ago!" so often, it woke me up at night.
The Present: So here we are in 2013. Good news is fast approaching - fewer homes are on the market, even investors are having difficulty finding deals. We are heading toward an appreciating market and interest rates are low. Homes listed for sale are receiving multiple offers. What could go wrong?
Appraisals. Appraisals determine the amount the lender is willing to loan on a property by obtaining the most similar recent home sales. (After 2007, limitations to appraisers increased on the comparables they could utilize within a report. Including using sales within 1 mile of the property being appraised and sold within 6 months of the date it is appraised.) It ain't easy.
Feeling the current optimism in the air, realtors are pricing homes higher than they would have last year. So let's say John Smith is selling his home for $400,000. and he receives an offer within 2 days at full price - tah dah! We have a new market value, right? Yes. However, if the buyer is obtaining a mortgage, that value must then be supportable to a lender. Appraisers deal with past sales while realtors are concerned with current and future values. In a transitional market, these appear to be opposing goals. So how does the market recover?
The Sequel: We did it before and we will do it again. Values rise slowly and consistently as more and more sales back up increasing prices and lenders become more comfortable with the market. The market is recovering and appraisals are going to be very different from those completed in a declining market. They need to be reviewed by real people and not expected to conform with computerized checklists. Appraisers need to be able, once more, to be trusted to know their market and if it is increasing, let their voice be heard!
And remember, appraisers are not the enemy of the recovery - after all, we are homeowners too.
The best solution is to hire a Realtor who is also a Licensed Appraiser. www.kellyriedinger.com