Good article from today’s Washington Post on the heightened impact of appraisals on real estate transactions in this difficult housing economy. It includes some well articulated comments from VAR members. Here’s an excerpt:
The housing market has shown signs of improvement, but home sales can still be challenging to complete. Deals can turn on whether the home receives a sufficient appraisal. The lender financing the deal hires an appraiser to estimate the market value of the property, examining the condition of the home and comparing it with similar properties in the neighborhood, known as comps. An appraisal, a professional estimate of the market value of a home, is supposed to protect buyers from paying too much — and protect lenders from extending too much credit.
But coming up with an estimate has become more complicated in the middle of a housing crisis. A high concentration of foreclosed homes in a neighborhood can distort the appraisal, real estate agents say. Foreclosures often sell at a discount and may be damaged after the homeowner leaves. Banks have also become more cautious about ensuring that the sales price reflects the market value, agents say.
The appraisal process is “much more difficult,” said Laura Fall, principal broker at Fall Properties in Arlington. “They have gone to the extreme of conservatism, and we are now in an emerging market with brisker sales,” she said. “It will likely iron out and balance out, but there is pain in the process of a market correction.”