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St. Louis Real Estate Search

 

Tips to Avoid Appraisal Problems

Dennis Norman St LouisYou finally reach a deal with a buyer to sell your house, or strike a deal with the seller of your dream home, only to see the deal fall apart later when the house doesn’t appraise for the price that has been agreed upon…what are you to do? This is a plight that has become all too common today for many buyers and sellers. Why? Several reasons….appraisers have, after being blamed by many for causing or contributing to the downfall of the housing market, understandably so become cautious and somewhat conservative when putting a value on a home today. Not to mention, since about a third of the home sales are distressed sales and prices are still falling somewhat in many markets, the “value” of a home is a moving target.

What can home sellers and buyers do to avoid appraisal problems?

The Appraisal Institute, which says it is the nation’s largest professional association of real estate appraisers, has released some helpful tips to help consumers avoid problems with real estate appraisals. Their advice includes:

  • Understand the role of mortgage appraisals. Real estate appraisals are critical components in real estate financing and risk management. Lenders order appraisals to get a stronger understanding of risk relating to the underlying collateral offered in a mortgage. Lenders want to know how much that property would bring in an open market so they can ascertain that the loan is well enough supported by the collateral. Mortgage appraisals are not technically provided to confirm a sales price, although they can help both lenders and consumers in making sound financial decisions. It serves neither the lender nor the consumer to enter into a mortgage loan that is more than the value of the property.
  • Make sure your lender hires a qualified appraiser, such as a designated MAI, SRPA or SRA member of the Appraisal Institute. The best way to combat potential problems with appraisals is to ensure the appraiser hired by your lender is highly qualified and competent. Today, many lenders utilize third party management companies to conduct administrative functions. These firms often seek out the lowest cost service providers, not necessarily the most qualified.
  • Accompany the appraiser during the inspection. Contrary to incorrect interpretations of appraiser independence requirements, appraisers welcome information that would assist development of credible assignment results. Consumers can accompany appraisers when conducting the property inspection and may provide the appraiser with any information they consider important.
  • Ask for a copy of the appraisal report. Even though the appraisal is ordered to help assess lender collateral risk, consumers have a right to, or can obtain a copy of, the appraisal.
  • Examine the appraisal report. Although appraisal review is best performed by qualified appraisers, you can examine the appraisal for potential deficiencies.
  • Appeal the appraisal. Or ask your lender to review the appraisal report. Most lenders have appraisal appeal procedures, known as “Reconsiderations of Value.” If you are aware of recent, comparable sales information or items that may not have been available or considered by the appraiser, provide those to your lender.
  • Ask your lender to order a second appraisal by a qualified appraiser. If problems were found with the first appraisal, you can and should obtain a second appraisal.
  • File legitimate complaints with the appropriate state appraisal board or professional appraisal organizations. Lenders are required under federal law to report legitimate complaints with appropriate regulatory authorities.

For the complete report, “Helpful Tips, What Consumers Need to Know About Real Estate Appraisals” by the Appraisal Institute, click here.

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