Home appraisals are out of control, and if you’re buying a home in Sequim or Port Angeles, you may find yourself in a most impossible situation like recent clients of mine did. What if you were told the home you want to purchase cannot be appraised? That would sound ridiculous, wouldn’t it? Well it happened, and here are the facts.
Home Appraisals Derailed
A retired couple pre-qualified to buy their home in Sequim, and the agreed sales price was about $200,000 less than the county tax assessment, and it was also about $200,000 less than it’s peak value in 2005. The appraisal came in very conservative and precisely at the already low purchase price. The cost of replacement would be about $100,000 more than this appraised value. Even the comparables in this appraisal were priced very low in this real estate recession. So the appraised value was very conservative, and should have made any bank feel secure, especially with qualified buyers coming up with a huge down payment.
Instead, the bank’s underwriter rejected the appraisal, and they argued that the most recent sales of similar homes are insufficient to establish value. The underwriter wanted sales within 90 days and within a very small radius from the subject house. It made no difference at all to the underwriter that a small real estate market like Sequim’s simply doesn’t have more sales in this price range. They don’t exist, which means the next best comparables are similar homes that have sold further back, like 6 to 8 months, and perhaps 5 to 10 miles or more away. After all, this is the country, not Seattle or Tacoma. Even with comps, an appraiser must differentiate the subject property to establish value.
The deal is dead since the bank will not accept an appraisal based on actual sales in the area. This is an extraordinary result and shows how truly ridiculous banks can be! Home appraisals are out of control, which is to say the regulators and politicians are out of control.
Home Appraisals Out of Control
Instead of local honest professional appraisers getting the job by referral, we now have an “objective system” of banks from outside the area hiring appraisal management companies from outside the area to appoint appraisers from outside the area to appraise a local home. How reliable do you think the appraisals will be with a system like this? The appraisal management companies will only include appraisers on their “appointment list” who pay the appraisal management company a “fee” and agree to a lesser appraisal fee. No wonder most of the long time honest appraisers with integrity in Sequim refuse to be part of that system.
Insane, isn’t it? This is how our politicians solved the mortgage fraud and appraisal problem, by making it so chaotic that either the appraisal your lender gets may be totally unreliable, or you may be told that the home you want to purchase cannot be appraised at all.
Home Appraisals – Could Kill Your Transaction
This is why I say home appraisals are out of control. My advice is to get the best mortgage broker you can find, and I know who they are, so you can email or call me. I also recommend that you know how to address the subject with your bank, how they will appoint their appraiser for your home, and the criteria they require for a Sequim appraisal. You have no control over how your bank appoints their appraisers, but you do have control over where you bank. Home appraisals are an area full of traps for the unwary these days.
Last Updated on March 17, 2012 by Chuck Marunde