You’ve got to blame someone, right?  The appraisal industry has been under fire for some time now because of the housing market meltdown.  I think it’s definitely a case of one bad apple spoiling the whole basket, though.  Okay, maybe not just one but there were many bad appraisals done from 2004 to 2007 - appraisals that indicated housing values skyrocketing and making investors giddy.

There were MANY good appraisers, too, so it’s evident that they aren’t solely to blame though.  There were lenders pushing the appraisers to edge the appraisal up by $2,000 or $10,000 or $100,000.  Realtors also didn’t want to see the transaction go away, so we also offered alternate comparables to the appraisers if we didn’t like what they had to say.  Buyers really couldn’t help themselves … who wouldn’t want to buy when the interest rates were shockingly low and loans were easy to come by?

The heyday has ended, though, and in retrospect appraisers are still getting blamed.  As a result, they are *still* causing concerns by now undervaluing real estate!  According to MSNBC.com,

It wasn’t the first time that Katherine Scheri ruined a real estate agent’s day with a low property appraisal.

Scheri, a real estate appraiser, had sized up a three-bedroom, two-bath house in Santa Ana, Calif., for $30,000 less than what the buyers offered to pay. A typical deal-killer for a seller.

The agent urged the lender to force Scheri to consider several other properties that could back up the original $310,000 sale price.

I’ve had my day ruined before, too.  The bottom line is to ask the seller how badly they want to sell.  Enough to drop the price to the appraised amount?  Ultimately it’s up to the buyer and seller whether or not to proceed if an appraisal comes back low.  However, agents should prepare both sides of the transaction for the possibility of an appraisal getting in a good gut kick first.

Loans are pretty affordable right now - if you qualify!  Here’s a quick snapshot of today’s 30 year rates with a 30-day lock:

FHA 4.75
VA 4.875
Conforming 4.75
USDA 5.00

Given these extraordinary rates, I think there are three things that prevent qualified buyers from jumping at this time: low consumer confidence, fear of job loss, and fear of paying too much for a house.  To me, the biggest fear of these is the fear of job loss.  The number of jobs being lost each month is slowing, but not so much where people aren’t nervous, according to MSNBC.com.

Over the past three months, the economy has shed a net 188,000 jobs a month, down from a pace of 700,000 monthly early this year. As jobs continued to disappear the unemployment rate rose to 10.2 percent in October, up from 9.8 percent in September.

If you do feel secure in your job, but worry instead about paying too much for a house - you can overcome this.  There are at least two ways you won’t overpay:  1) make sure your agent runs a price comparison of other homes in the area, and 2) get it appraised.  Appraisers are being super careful now not to overvalue homes.

What do you say?  Have you been thinking about buying?

Appraisers have a hard row to hoe these days.  Realtors and lenders, buyers and sellers are all mad at them because two and three years ago they “inflated” prices.  Now they aren’t taking any chances and seem to be “deflating” prices.  Or they mark a home as being located in a declining market area allowing some lenders - at their discretion - to require a bigger down payment or they don’t fund the loan at all.

All in all, though, I think appraisers are doing the best they can with what’s been handed them.  One appraiser I just spoke with has been handed a big pile of mess to deal with.  She’s been asked to appraise a home that has been foreclosed on and the people who lost the home are hostile about the eviction.  But she’s expected to go in - even though she had nothing to do with the foreclosure or eviction - and face an angry family so she can determine the value of the home on behalf of the bank.

I wouldn’t want to be in her shoes right now.  Not at all.

Appraisers have been terribly skittish this last year or so. They’ve definitely taken a good portion of the blame for inflated home prices - especially when the housing bubble burst - so it’s no surprise that they’re being extremely careful with home purchases today.  In my heart I believe appraisers were doing their job basing home values on sales in the last six months.  I can see where prices would climb to a beautiful crescendo based on the last six months, then the last six months, then the last six months when each month the value would leap up several thousand dollars.

And yet they bore a great deal of the blame when the market went thud.

I asked at our meeting this morning if there is a book that appraisers carry with them or have in their offices that details the value of granite counters vs. laminate vs. wood.  Or what does a 1-car or 2-car or 3-car garage add in value compared to a home with no garage?  One agent said she was made aware of a checklist years ago when she took an introductory appraisal class.  But the question remains … if an item like a fence or an above ground swimming pool will have no value in 30 years, does it add value today?

I want to get my hands on a book or guideline sheet like this because I’d love to show my sellers in black and white that their pool really isn’t worth the $25,000 they think it is.

Here’s more bout why appraisers are careful to the extreme today from USA Today,

More than 60% of mortgage fraud cases last year stemmed from falsified applications, while 28% came from tax returns or financial statements, and 22% came from appraisals, the study said.

Here more interesting information about appraisals by Mary Thompson Lake Lanier, an appraiser in Georgia.