Are Appraisals Preventing a Housing Recovery? Part 3 of 3

Fortunately, at the end of the day, I had a buyer and a seller that were both reasonable people, and who wanted to get the deal done.   As a result, my buyer came up $35,000 from the appraised value, and my seller came down $35,000. This is probably where you would you pat me on the back for a job well done… not so fast. The appraisal came in at $300,000 - exactly $125,000 below the Sales Contract price. The deal died.  A few months later, I found a comparable home in the area that sold at the same time as our property was under contract, and it had a sales price of $380,000…having to be completely remodeled!

 The appraisal could have been challenged but was so ridiculously low that this option was not pursued. The buyer bought another home and the seller took his home off the market.

Even if you assume that the purchase price could not be justified, had the appraiser done a thorough job making the appropriate adjustments based on recently sold properties, an opinion of value that was $50,000 below the sales price of $425,000 would have been enough to get the deal done. Shame on the lending institutions and appraisers for letting the pendulum swing too far in one direction years ago, over appraising properties and contributing to an economic crisis. Today, they are overcompensating by swinging the  pendulum too far in the other direction.

The banks and their appraisers are preventing home values from rising. I currently have a property under contract that has been appraised at an average of 10% below the selling price twice in four weeks - with two different buyers and two different appraisers. The seller will not reduce the price, and the current buyer will need to make a decision in the next three days whether or not to pay over the appraised value.

The seller, who is selling by owner, has two additional potential buyers right now who want the property and will pay the price. Four buyers in four weeks have searched for the best deal they can find and chosen this home. How can all of these buyers be wrong? The banks and their appraisers are seriously hurting home sellers, home buyers, loan officers, and Realtors. If they would let the free enterprise system work, we could see the real estate market begin to turn around. For "Moore on Real Estate" by Palm Beach Real Estate Guy visit http://www.realestateinpalmbeach.net/