Dawn Rivera’s Fremont & East Bay Real Estate Blog

Make sure your home is in top condition so you have a better chance to get a good appraisal………

Less than a week after putting his newly renovated house on the market, “Rick” accepted a full-price offer of $242,900 on the 1940 bungalow. But the appraisal on the 1,780-square-foot home came in at just $206,000. The buyer couldn’t come up with enough cash to make up the difference and Rick wasn’t willing to drop the price, so the deal fell through.

On top of sluggish home sales, are appraisals becoming the newest threat to the local housing market?

Real estate experts say sales are collapsing as appraisers are being more conservative and valuing homes for less than what buyers have agreed to pay. Owners can’t refinance because appraisers say their homes are worth less than they had counted on.

In the example of Rick’s home, the low appraisal affected the would-be buyer’s ability to get a mortgage for the contracted price. Their lender naturally, wouldn’t approve that. Many Real estate brokers have seen a number of sales fall through because of low appraisals, and that has the potential to hurt property values, too.

Part of what’s at issue, a new rule that went into effect May 1 prohibiting loan officers, mortgage brokers and real estate agents from selecting appraisers.

The rule falls under the new Home Valuation Code of Conduct, the result of an agreement between Freddie Mac, Fannie Mae, the Federal Housing Finance Agency and the New York state attorney general to enhance the independence and accuracy of the appraisal process. It applies to lenders that sell single-family mortgage loans to the government-sponsored enterprises.

The rule was meant to prevent inflated appraisals like those that proliferated during the housing boom.

Unfamiliar with the area

One of the unintended consequences of this system, however, is the chance that a management company, will hire an appraiser who isn’t familiar with the neighborhood where the house is being evaluated. When you have appraisers coming from different parts of town and not knowing areas, they aren’t doing justice to the people that are trying to refinance or sell, It really skews the whole appraisal process.