Expect Appraisal Problems
The current market has many of the characteristic of the 2004-2005 RED HOT market . . . . ALMOST! Remember when the entire housing crisis was basically blamed on the appraisers. I have disputed this from the very beginning and based my assumption on the fact that those appraisals were based on the comparable sales at the time and an under-supply of available homes as compared to the number of buyers.
Well they are not over valuing properties now. Obviously with all the media hype blaming appraisers and Dodd-Frank making it impossible to even check to see if an appraisal has been ordered or when it will be completed, we are going to have appraisal issues. The biggest problem we have right now in a similar market (however in no danger of repeating the overvalue market of 2004-5) is the appraisers are being ultra-conservative for the most part. I say this after just completing my fourth appraisal challenge of the week. The appraiser did not hesitate to give a negative market adjustment when the market was going down from 2006 to 2009. They are however, very reluctant to give and upward appreciation in our current market. I do not believe this is a conscious or collective attempt to hold the market down, simply one of two things. The first reason is likely simply a failure to react or perceive the current market. While I currently have appraisers that are unwilling to place value even at the higher end of the range, some are actually placing more emphasis on pending sales rather than closed sales to justisify a higher appraised value. This IS an accurate reflection of the market. The second reason is a direct reflection of media's and many peoples perception that appraiser's were at fault for the mortgage crisis and the legislation that followed. Dodd-Frank now makes it impossible for us to speak to an appraiser to inform him of our local knolwedge of a property. On one of our appraisal challenges, the appraiser had taken off $3,000 from our appraised value because the comparable sale backed to a "common area or park". This common area happens to be a cemetary, not a huge negative but not a bonus either.
In a time of very short supply of homes, many buyers are simply paying more than the home appraises for to get their home closed. It is not rare at all that buyers pay something over appraised value for their home. This is a little unfair to the buyer who simply does not have the cash out of pocket to bridge the gap between sales price and appraised value and slides the abilility for some of them to get an offer accepted toward the cash buyer or investor.
All and all, we have had an intense burst of appreciation and it will take time for the appraisers and comparable to catch up. It is a good time to sale during almost unprecedented demand and a good time to try to buy if your financing is in place.