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Appraisals continue to hamper home sales - NAR

BY Tom Kelly  on October 11, 2012 @ 10:31 am (Updated: 6:46 am - 10/12/12 )

The real estate market is recovering but appraisals are one of the issues holding back home sales, according to survey findings by the National Association of Realtors.

Although 65 percent of members surveyed in September report no contract problems relating to home appraisals over the past three months, 11 percent said a contract was cancelled because an appraised value came in below the price negotiated between the buyer and seller, 9 percent reported a contract was delayed, and 15 percent said a contract was renegotiated to a lower sales price as a result of a low valuation.
These findings are notable given that homes in many areas are selling for less than replacement construction costs.

Lawrence Yun, NAR chief economist, said there has been a steady level of appraisal issues for quite some time.

"Though the real estate recovery is taking place, the combined issues of stringent mortgage lending requirements and appraisal frictions are hampering otherwise qualified buyers from purchasing a home in a timely fashion, and in some cases are preventing them from buying at all," Yun said.

Major problems reported include:

  • Appraisers using foreclosures, short sales, and run-down properties as comparable homes, and not making adjustments for market conditions or the condition of the property.
  • Appraised values that do not reflect market conditions such as rising prices, multiple bids, and low inventory.
  • Out-of-town appraisers who are not familiar with the area or local market conditions.

Tom Kelly, Real Estate Today
Tom Kelly has been a professional journalist for 36 years. He served The Seattle Times for 20 years, many as Real Estate Editor.
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Comments (4)


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  • ron prevost wrote...
    Earth to NAR (and to Tom). Appraisals are SUPPOSED to be a check on home sales
    October 15, 2012 5:44 am
    Uh, just how else would you expect a bank or other lender to decide if it's OK or not to finance a home purchase? ... Just take the realtors' word for value?

    ONE of the reasons we got into the mortgage/housing crisis was BECAUSE of fraudulently high appraisals 'justifying' fraudulently high sales prices that facilitated flipping and other scams. ... And now NAR wants us go go back to ignoring the market?

    Market value is just that MARKET value. .. NOT the highest possible (nor the lowest), but the most probable sales price. .. And that means still in some areas (unfortunately) where bank owned and short sales are half the listings & sales, that IS the market.

    The housing market is recovering, but it's not all going to happen overnight.

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  • sportsguru wrote...
    finally Ronald
    October 15, 2012 5:48 am
    Something we can agree on. I think it is crazy that they are blaming this on appraisers who are doing there job and being ethical about it.
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  • honus w wrote...
    home appraisals
    October 15, 2012 7:35 am
    Could you imagine being a home seller and coming to an agreed price with a buyer, only to have the deal fall apart because the appraisal came in under the agreed price. I think what he is trying to say is that in some cases they are not using appropriate comparables when determining a homes value. I'm in the process of renovating a small house in Tacoma, down to the floor joists. Brand new. The house next door is getting the "lipstick on a pig" treatment. The cheapest in stock home depot cabinets and the cheapest carpet available and another layer of paint inside and out. If it sells before mine it could be used as a comp when mine sells, but is nowhere near the same house. We'll see.
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  • ron prevost wrote...
    Unfortunately, Honus, too many real estate people will want appraisers to use your total remod sale to justify whatever price they put on the pig.
    October 15, 2012 3:28 pm
    Appraisers usually DO appreciate extensive work and value it accordingly. ... But an unknowing underwriter or someone reviewing the appraisal without seeing it IS likely to 'cut value' on yours. ..... Unfortunately, too many reviewers still think all appraisers inflate value and cut accordingly.

    Cost does not equal value, BUT if enough total remods get sold, most appraisers (and reviewers) WILL recognize value.

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