Why Didn’t That Home Appraise?
Test your knowledge of today’s housing market, and answer the following question:
What is the most common reason homes fail to appraise today?
A. Buyers who pay an above-market price, perhaps in multiple offers.
B. Appraiser inexperience (they use the wrong Comp’s, or get the adjustments wrong).
C. Appraiser error (see, “B.”);
D. The appraiser is working off of the wrong sales price.
E. The appraiser fails to account for a rising market in their analysis.
Correct answer: D.
Receding Risk
The good news regarding appraisal issues is two-fold: 1) in a now-rising market, they’re receding; and 2) the most common reason for a glitch (“D.” above) is easily avoided.
The usual explanation for the appraiser using the wrong price is that the Buyer’s home inspection turned up one (or more) issues that were resolved by reducing the sales price.
However, the Addendum commemorating the price change never made it to the appraiser (or, got lost in the shuffle of Purchase Agreement doc’s — 20 to 25 pages for a typical residential deal these days).
Attentive agents can make sure that that doesn’t happen.
P.S.: As the above suggests, the appraiser is explicitly told the home’s purchase price.
In the vast majority of cases, they stop when they can support that value (vs. overshooting and assigning a higher price).
