Low Appraisals are Complicating Selling and Refinancing Homes

by Yvette Betancourt 

The appraisal process has become a challenge, especially for homeowners who are looking to secure historically low interest rates.  Let's not forget the challenges of a low appraisal for home buyers purchasing with a loan. 

N.A.R. (National Association of Realtors) conducted a national survey to real estate agents  and found that a low appraisal has caned a contract to be canceled (11%), contract was delayed (9%), and a contact renegotiated to a lower sale price because of a low appraisal valuation (15%).  

But Why?

Some appraisals are being conducted by large appraisal management companies who may not be experience in the neighborhood.  In Los Angeles, a one-mile radius in Valley Village, CA will include homes from affluent Studio City and up-and-coming North Hollywood which has drastic home values.  

What can be done if you are caught in a low appraisal fiasco?

If your property has multiple offers, ask the appraiser to note the number of bids in the report to show that the market is appreciating and the amount of interest in the property.  This may or may not work but it's worth a shot.

Remember that an opinion of the appraiser doesn't always determine the sale price.  It's the data.  

If you are a home buyer and a home you are in escrow in has a low appraisal, the lender will cap the loan and the difference (if you are to continue with the purchase) is on you, the home buyer. 

In the end, the appraiser isn't the bad villain in these situations.  For the most part, they are trying to do the best work they can.  Its the location and it's current local market that makes the difference.  If you have a high number of foreclosures and REOs in your area, this will cause problems, especially there aren't homes similar to your property.

Source: latimes.com/business/realesate