Stark contrast: Appraisals spark bidding wars, torpedo dealsNovember 26, 2012 @ 9:54 am
In recent months, some low appraisals have sparked bidding wars on local properties, including a nine-bid contest for a small farm on Bainbridge Island. The bidding wars have helped push up home prices higher than recent comparable sales, agents say.
In other cases, a low appraisal can threaten to derail the deal because sellers will not agree to a lower number.
One in three real estate professionals surveyed in September say they've had problems relating to home appraisals in the last three months, with some saying contracts have even been canceled because the appraisal came in lower than the negotiated upon sales price.
Appraisers have faced criticism over their property valuations in recent years, and have been accused of using foreclosures and short sales as comparable sales without adjusting for the reason the house sold for a lower price.
However, appraisal firms say the idea that appraisers are suppressing home sales is unfounded. Appraisers say they' don't set the value; they reflect it.
"We often hear from real estate agents, homebuilders and others that appraisals are 'killing deals,' and/or holding back the economic recovery," Sara Stephens, president of the Appraisal Institute, testified to Congress earlier this year. "These accusations are unfounded and misguided. Appraisals are not meant to simply support contracts-they are obtained to help lenders assess their overall risk. Fundamentally, it does neither the borrower nor lender any good to enter into a mortgage for more than the value of the property."
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