“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.
The market sill only bear so much. Distressed properties are everywhere in our area right now. Sad fact of life. Hopefully the economy will turn around soon.
The property is only worth what a willing buyer will pay in an open market when marketing has presented the most viewers.
Whether the house is distressed or not is academic. The house has a value.
Living in Toronto
I am wondering why different appraisers come up with different prices for the same property??
Interesting point, I wonder if Ms. Stephens has an answer to that? 🙂
Real estate appraisers are able to look at past, present and future trends, analyze data and make supportable adjustments and assumptions in order to arrive at the market value of a property. Because the appraiser is independent and objective, the results of their findings are not biased by their own personal gains. As a native Houstonian and real estate appraiser for over 35 years I tell people "I've seen the best and the worst of real estate and never left the city". Boomtown, bust town and everything in between. Home prices can go up but they can also come down, a concept most tend to overlook. For those of you that don't remember, when residential home prices peaked out in 1983, it took some neighborhoods 15 years to achieve that same level of prices that occurred during the 1983 peak.