Even though 2015 is still young, we’ve been seeing controversy in the appraisal world thus far. The bottom line, more and more reactionary appraisals, reflecting amounts well below market value, are surfacing around the country.
There have been loads of examples of these appraisals. A property that had been appraised for purchase a year ago was set at $448,000 and then re-appraised at $418,000. In another instance, a home that was appraised a year ago for $400,000 was just re-appraised at $390,000. An occurrence on a larger scale was a home that was appraised at $665,000, just to have to be re-appraised because the appraiser wasn’t on the lender’s approved list. The new appraisal came to $40,000 below the first value with no overlapping comps.
The majority of these appraisals have required restructuring of the loan, and in some cases have even destroyed the deal altogether. So, what is causing this to happen? No one is for certain, but there are many leading factors that could be involved.
We believe that the problem is mainly in refinances, but the dilemma could also be growing with purchases. There are varied loan types tangled in this mess: VA Loans, FHA loans, but mainly conventional and conforming loans.
This appraisal controversy may even be because of the recently heavy volume of loan applicants that could be overwhelming the appraisers. The influence of the internet could also be a factor, as more owners are turning to Zillow first when they are thinking about refinancing. Sites like Zillow provide ballpark figures that are intended for trends, not absolute values. The appraisals might even just be based on underwriters and real estate agents seeing comps in an entirely different light.
With the current conservative appraisals popping up early on this year, we should all be sure to watch what’s really going on as the experts continue to research and monitor this dispute. What do you see as the problem?