Why are the appraisal values so high? - Posted by Larry TX

Posted by Bart (FL) on March 12, 2004 at 08:15:23:

Sounds like a plan!

Bart (FL)

Why are the appraisal values so high? - Posted by Larry TX

Posted by Larry TX on March 10, 2004 at 10:21:59:

Newbie question:

It seems that everyone who calls on my we buy houses ad has had an appraisal that is way above the comps in the area. Most of these people have an unrealistic expectation as to a retail value of their house, much less what I would pay. Yesterday, I spoke with an owner who had her house listed on the MLS since June for $89.9K and the comps were at $61K with a neighborhood average sales price of $62k. She also had an apprasial of $89k. This was a motivated owner who belived the value was fair and that the house did not sell because she couldn’t keep it in perfect show conditions due to health conditions and tending to young children. She very much needed to sell and move into a cheaper place. The apprasier and her real estate agent have put her in a bad position by wasting her time and giving her expections of getting money that she badly needs, but will not be comming.
Another comped at $164k, but she had an appraisal of $184k.
I know there is some wiggle room when an appraiser picks a value, but shouldn’t there be some relation to the resale value?

The REAL resaon for bad appraisals - Posted by ken in sc

Posted by ken in sc on March 11, 2004 at 07:23:23:

Remember the savings and loan debacle? After that, the federal government decreed that the states shall regulate their appraisers. Thus, licensing came along. Before licensing, appraisers had to stand on their reputation and show their membership and affiliations with competent appraisal national organizations (such as being an MAI) in order to sell their work. Now, because of licensing, a license is all that is needed. Most states made the licensing procedure easy enough so that soon there were way more appraisers than before. In my state, the number of appraisers increased by 300% in just a few years. Then, the fight was on to get market share. Guess who won that fight? The appraisers who would give values that the lender wanted! Good appraisers who “cut” value as compared to the lenders wants were no longer used. So, over the years we have seen a steady increase in bad or inflated appraisals.

I know this because I have been an appraiser for 15 years. This year, due to my switch to REI as my full time occupation, I will let my appraisal license lapse. I no longer want to be associated with the business. Sad but true. There are still good appraisers, don’t get me wrong, but the amount of bad appraisals is staggering.


Re: Why are the appraisal values so high? - Posted by Jasonrei

Posted by Jasonrei on March 10, 2004 at 22:03:47:

One scenario is a seller that overfinanced a house. Now they owe way more than the house is worth. To them the value is whatever is needed to get them square.

It seems these sellers aren’t motivated enough to deal with. If you really wanna know why their prices are so out of line, ask them for a copy of the appraisal. I just bought a home to live in, and it appraised for about 10% than I could honestly hope to get for it. The appraisal I got was legit, it just ignored the REALLY comparable houses and went with the comps that fit the situation.

Re: Why are the appraisal values so high? - Posted by Phil (CO)

Posted by Phil (CO) on March 10, 2004 at 11:52:57:

In my opinion, it’s a product of the low interest rate/refinance craze.

Mortgage brokers want to get people’s business. If they can promise a
“good” appraisal, they will likely get that business. If they find a
“friendly” appraisor, they will continue to feed that appraisor business.

On the other side, the appraisors are giving inflated appraisals so that
they can keep the mortgage brokers’ business. As long as the
appraisals aren’t too far out of whack, this practice will continue.

It’s probably why we are seeing so many people in foreclosure these
days. They got in way over their heads, and now find that they can’t
make payments and have no equity (or are upside down).

Just my view of things.

Re: Why are the appraisal values so high? - Posted by chris-atl

Posted by chris-atl on March 10, 2004 at 11:48:51:

I always ask why they had the appraisal done. People don’t just go out and get a random appraisal done of their house. There has to be a reason. And with interest rates as low as they are, lots of folks are refinancing, so they have it appraised as part of the refi process. If they say they had it appraised from a refi, I automatically ignore the value they quote because refi appraisals are almost always inflated. I know first hand, because I just refinanced a house and the mortgage broker had to get a certain appraised (and inflated) value to make it work so he just shopped his appraisers until one would give him the value he needed. So refi appraisals are pretty much worthless. Go on comps. That is what gives you good values - what other similar houses are selling for.

Re: Why are the appraisal values so high? - Posted by Christen

Posted by Christen on March 10, 2004 at 11:38:36:

One reason is that FHA allows closing costs and downpayment to be rolled into the loan. So now appraisars are inflating the appraisal to accomidate.

Re: The REAL resaon for bad appraisals - Posted by Bart (FL)

Posted by Bart (FL) on March 11, 2004 at 16:10:19:

I think I would keep my license current. Always good to have a safety net.

Bart (FL)

Not needed - Posted by ken in sc

Posted by ken in sc on March 12, 2004 at 06:56:04:

Keeping my appraisal license current would require taking two continuing ed courses, paying fees, and paying E&O insurance. There is no need. I have spent the past 6 or 7 years making this transition. Last year, over 90% of my income was from REI. I think I will be OK. I fact, I am thrilled to let it go as appraisals have become boring in comparison to doing deals, not to mention it is less lucrative! One deal can make me as much as I made last year doing appraisals. This has been my plan all along and I really could have accomplished it quicker but kept the safety net to be safe. Besides, the license can be “inactive” and thus could be brought active in the future by taking those courses and buying the insurance.