Appraiser in house with clipboard
Though this applies more to sellers it also comes into play for buyers.  The appraisal can make or break a deal when the buyer is getting financing.

I’ve seen this twice over the last year where a buyer ended up paying more out of pocket than they really should have due to the appraisal.

In the first instance, the appraisal came in at about $150,000 when the contract price was $155,000 and we found a few points that could have made a $5000, but even though the appraiser complained about these points during the appraisal they refused to make any changes afterwards.

The second instance was just inexcusable.  My client had an appraisal for $200,000 when the contract price was $170,000.  He had to change the type of loan he was getting about 2 weeks before the closing and in this particular situation had to have another appraisal done.  The second appraisal was done through the company that had done an ‘appraisal review’ of the first one and had approved it.  But they sent someone out who was not from that area and we got the appraisal back 4 days before closing – it came in at $160,000 which was $10,000 less than the contract price and $40,000 less than the first appraisal.

When I looked over this second appraisal I could see that the appraiser had noted the 3rd bedroom in his drawing but failed to include its square footage in the total.  This alone would have made enough of a difference to have the appraisal come in at least at the contract price, but there were 3 other errors he made which also had a negative effect on his appraisal price.

Due to the circumstances of this deal my client only had 2 choices, accept the appraisal and come up with the additional cash needed or lose the deal (we had to close on the closing date or the seller would go with another buyer so we didn’t have the time needed to dispute the appraisal).  Fortunately he had the cash available and was able to close and is very happy he did, but he should never have been put through that.

This article describes some of the problems that come up with appraisals:

Making sure your home gets appraised accurately

By Paul Owers, Staff writer, SunSentinel

Despite rising home prices across South Florida, sellers and real estate agents still complain that low appraisals delay or kill up to 15 percent of all deals.

In recent years, agents and others blamed a 2009 law that they said inadvertently led to less experienced appraisers working in unfamiliar neighborhoods.

Now a common refrain is that appraisers purposely keep valuations down. St. Petersburg appraiser Frank Gregoire, who testified before Congress, says banks and underwriters are pressuring appraisers “to be less optimistic and more cautious” to prevent another housing bubble….More at Making sure your home gets appraised accurately

There are some good tips in this article about how to approach the appraisal as a seller and why you need a good Realtor to represent you.  This is also something that a buyer’s agent should know because they want to apply this information in coordination with the seller’s agent.
If you have any plans to sell, or to buy using financing, you should definitely be aware of this situation so that you can be prepared and so that you won’t be surprised when it comes to the appraisal.


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