The recovering housing market is welcomed by many, but swift increases in home prices can make the job of an appraiser much more difficult.
Jonathan Miller, president of the Miller Samuel Real Estate Appraisers, says appraisers are facing an increasing number of accusations from buyers and brokers that valuations are coming in too low and under the agreed upon sales price in housing markets where prices have jumped rapidly in recent months.
Some neighborhoods have seen prices rise 25 percent in the past year. The appraisals, however, haven’t caught up to reflect the rise in prices, brokers say.
About a quarter of real estate transactions have had “some sort of problem with appraisals,” said Jed Smith, managing director of quantitative research at the National Association of Realtors.
“In a rising market, appraisals tend to lag the market because appraisals are looking backward and the market is looking forward,” Smith told Investor’s Business Daily.
Acccording to Miller, most property valuations are valid, but a big contributor to the problem is due to markets that are moving too quickly and “inconsistently.” The markets that are seeing particularly scarce inventories and bidding wars may see valuations that can change “within a couple of weeks,” Miller said.
A low appraisal can prompt buyers to try to renegotiate a lower sales price or force a buyer who is trying to get financing to find a way to come up with more money in order to proceed with the sale.