You gotta know the territory
I had a conversation with a listing agent whose seller is insisting on a price that has no basis in current comparable properties. Partly, it is an odd-duck kind of place. Partly it is over-improved (that means that it is too nice for the building and the neighborhood.) Partly, the sellers bought it at peak.
My buyers like this place. When I did my CMA, I could not justify the price. Not even close. I asked the listing agent what he was thinking. He gave me comparables in a totally different neighborhood (it would be like comparing Jamaica Plain to Back Bay.) When I said that the comparables don’t work based on location and an appraiser would know that, he reminded me that the appraiser may very well be clueless about this location issue.
He might be right about that.
Enter NAR. Friday, I got an email telling me the NAR has succeeded in making important clarifications in Home Valuation Code of Conduct (HVCC.)
First, it states that lenders should use appraisers who have clear experience in the geographic area.I am often on the other side of the issue when it comes to NAR lobby efforts. On this one, I agree more than usual. It is important, especially in urban areas, that the appraiser know the territory. I have seen some really foolish comparisons used by appraisers who don’t know one urban neighborhood from another.
Brokers, are you still seeing appraisers who don’t know anything about the town they are appraising in?
Appraisers, are you asked to work in too many places?
Buyers and sellers, have you had appraisal problems that caused the cancellation or delay of your transaction? Do you think the appraiser was wrong? Do you think the appraiser had no background in the town your house is in?
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my house deal fell through when an appraiser from Mattapan appraised my house in a small town in Metrowest among Hopkinton, Medfield, Holliston.... he came in at $42K below the agreed-upon price. the appraiser himself never actually set foot in the house -- he sent an underwriter to do his job.
knew nothing about the area, the neighborhood, and the fact that houses in my town seriously hold their value.
too bad for us and too bad for the buiyers. i expect there will be more of this in the coming months.
Though it is important to get an appraiser who knows and works within a given territory, incorrect appraisal numbers have always been with us, as Real Estate is not and never was an exact science. We saw incorrect appraisal numbers during the boom years, as everyone, including appraisers, just assumed that prices would continue to go up every year - which left a lot of current sellers holding the bag.
As a listing agent, I would always meet the appraiser and show him (justify) my selling price, as many of them might know the area, but they don't (or didn't) go into each and every comp in his current list of comps, as many appraisers work a given area and they don't know what one seller did in the way of improvements over another seller, etc. We can help, but we can't create miracles, especially nowadays in this lending environment. I always write contracts so my buyer can walk away if the home doesn't appraise.
When all is said and done, it is usually the seller which establishes the asking price and it is up to us as Realtors to try and make a sale happen. Until we banish greed and/or stupidity, we will always have over priced homes and homes which can't get sold because the asking price is too high..
I am a nappraiser in S. Cal. Since the inception of the HVCC, I have lost all my clients, and now have to work for a out of state AMC. I used to get alot of local work. Now i get work based on a rotational basis. I have to accept orders in areas i did not typically cover, if I don't, well, I make no money.
Appraisers are going to other areas because that is the only work that comes there way since the HVCc went into place.
Did you have a problem with this before the HVCC?
I recently had an appraiser come in $10K low on a property I am purchasing....While that is not a big issue financially for most people, the more concerning issue is the quality of the appraisal and the appraisal review company. One mistake was that the appraiser used a comp from a TOTALLY DIFFERENT TOWN and listed the address as being in the wrong town. This obviously shows the appraiser did not do his job. The appraiser also used comps that were not compared "apples to apples" - for example, one comp he used sold 2 weeks earlier for $30K more. However, he had adjusted the property square footage to only include the upper level of the split entry in the appraisal - I do not raise concern to this, what I raise concern to, is the fact he used the MLS listed quare footage on the comp that was actually 800 sq ft more than the sq ft on town record and what would have been appraised if he did an "apples to apples" comp.
Not to mention that the seller was there for the appraisal and said this bonehead was more interested in talking about himself, his new gold clubs and getting out on the golf course.
Now this appraisal goes through a second set of eyes with the appraisal review company and noone does their job.
It is now being reviewed by the lender and I seriously hope someone loses their certification because of this.
Tha AMC's want the cheapest and fastes work done w/o regard to quality or if an appraiser knows the area, most good lenders and LO's are the same as a lot of the bad appraisals are dealt with thru more intense scrutiny from UW's. Most good exp appraiser's like myself will not take the 1.2 fee work thru the AMC's as who would take a 1/2 pay cut and then be pressured to work 24/7, appraisers doing the discount work have to cut corners as any business person knows you can not take 1/2 in gross sales w/o cutting overhead the same with the biggest infraction being not driving the comps and just taking a photo off the MLS, appraisers ha
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