Problems with property appraisals negatively affected scheduled
home sales for more than one-third of Realtors last summer,
according to a recent survey.
Appraised home values that came in lower than expected resulted
in canceled or delayed sales, and contracts renegotiated to a lower
sales price, according to the National Association of Realtors
(NAR), which released the survey today.
The NAR said that appraisals have tended to lag market
conditions during the recovery and that changes to the appraisal
process in recent years have created problems as well. In some
cases, according to the NAR, appraisers were brought in who were
not familiar with local market conditions or who had only limited
access to sales data. In other cases, loan processors working for
lenders simply reduced appraised values by a set percentage as a
matter of routine.
"Though the real estate recovery is taking place," said Lawrence
Yun, NAR chief economist, "The combined issues of stringent
mortgage lending requirements and appraisal frictions are hampering
otherwise qualified buyers from purchasing a home in a timely
fashion, and in some cases are preventing them from buying at
all."
The NAR said that most appraisers are competent and provide good
valuations, some problems with appraisals continue to burden the
housing market.
The NAR reports that, in a September survey, 35 percent of its
members reported having an appraisal-based problem with a
contracted home sale over the previous three months. That figure
includes 11 percent who reported a sales cancellation as the result
of a low valuation, 9 percent who reported a delayed sale and 15
percent who had a sale renegotiated to a lower price.
One of the major problems the NAR has complained about
frequently in recent years has been the effect of distressed
property sales on appraised values. With foreclosures typically
selling at a 20 percent discount compared to a conventional home
sale, according to NAR figures, and short sales selling at a 15
percent reduction, the NAR says it is inappropriate to use such
sales as comparables when making an appraisal for a conventional
home sale.
First published on MortgageLoan.com at:
http://www.mortgageloan.com/appraisals-said-lag-market-values-9264