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.