“Don’t shoot the messenger” reads a new message from the Appraisal Institute, which has asked those involved in real estate deals not to blame appraisers when a contract falls through based on a property’s values.
Appraisers have been taking a lot of heat in recent months over the low value of homes they have appraised. Critics of appraisers claim that their valuations rarely match the price given on home listings, partly because they give unfair weight to distressed properties in the local market when calculating values.
However, the Appraisal Institute has shot back at its critics, saying that appraisers are not the ones who set the real estate market. Sara W. Stephens, president of the Appraisal Institute, claimed that appraisers merely reflect what is happening in local markets.
“Obviously, markets are depressed,” says Stephens. “Prices have fallen below the values of just a few years ago. Homes just aren’t worth what owners think they should be.”
According to the Appraisal Institute, the main goal of appraisers is to protect lenders from entering a mortgage that could be risky for them, rather than justify the sales price for buyers and sellers. Even so, the report stresses that appraisers are independent experts and completely unbiased when it comes to their valuations.
Stephens goes on to say that buyers and sellers should refrain from automatically “assuming an appraisal is wrong” when it doesn’t correlate with the contract or listing price. “People shouldn’t assume that a listing price is correct,” she adds.
Much of the criticism surrounding appraisers is directed at their use of distressed home sales as comparables when they make their calculations – critics say that comparing an abandoned, foreclosed home that may need heavy maintenance work with one that has been lived in and well kept simply isn’t fair.
But Stephens counters this argument too, saying that appraisers know the adjustments they have to make when taking distressed sales into account. Indeed, she adds that in some markets, the prevalence of distressed sales is so high that it would be improper if they were not used as comparables.