In 20 years in the business, I can count on one hand, make that 2 fingers, the number of times in one of my transactions that a house didn't appraise at the sales price.
Since the lending business is now in such a turmoil, appraisals have become an issue. First, they are more expensive. A buyer client of mine just paid $500 for one. The cost used to be $250. Because the appraisal came in below the sales price and he and the seller could not come to terms, he did not complete the transaction and lost his $500.
Second, they can be totally inaccurate. Lenders are using appraisers that are not familiar with the neighborhoods and so they do not generate an accurate report. In my case referenced above, the appraised value was so low that even if the lot had no dwelling on it - the appraised value would have been higher. There is no recourse at this time for a bogus report.
In the low-end market, low foreclosure sales are playing havoc with comparable sales prices.
A wise real estate agent will have added an appraisal contingency to the purchase contract if there is a loan involved. A lender will lend on 80% of the appraised value, therefore the appraisal price is important to the borrower. So what happens when a house does not appraise? Ordinarily the seller and buyer renegotiate the sales price. The buyer usually needs to come up with more money - which often is not possible. Ergo - transaction falls apart.
Now brokers, agents, sellers and buyers are sweating out the appraisal as we haven't in a good many years.
Email or contact me @ 483.2342 for more info.
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