While we are seeing multiple offers on many homes on the market and offers above list prices, ultimately we realtors are keenly aware that the home must still appraise at or above the agreed upon sales price in order to get funding from the buyer's lender.
The National Association of Realtors reports that 33% of realtors reported appraisal problems in May. So what's behind this issue? Kenneth R. Harney reports that appraisers are reluctant to report local appreciation in values. Former Florida Real Estate Appraisal Board chairman, Frank Gregoire says "many appraisers are reluctant to make the upward adjustments they know to be justified because they fear criticism that they are potentially overvaluing the property....so they take the easy way out and go with a lower valuation to avoid upsetting the hyper-cautious reviewers at the appraisal management companies". (and lender underwriters)
Harney's recent article reports that Joseph Petrowsky, an owner of a mortgage company says "too often valuations in upward-trending markets aren't catching up with the new values let alone a property that was involved in a bidding war".
This is killing many deals!
So, with a much smaller inventory of homes on the market; (especially those that are not short sales and in highest demand) many buyers are having to make offers on as many as three or four homes to get an accepted contract. Often realtors are faced with suggesting higher than list price offers but are very concerned that the home appraise at the agreed upon sales price. Let's hope that the problem with appraisals biased on the low value side is something that will not continue much longer.
