APPRAISAL ISSUES

Now that the new rules have gone into effect for appraisals we are seeing a lot of problems with homes not appraising. The new rules, if you are not familiar with them, state that if the loan is a conventional loan that will be sold to Fannie Mae or Freddie Mac there can be no contact with the appraiser. The lender nor the real estate agent can pick the appraiser. So how the appraiser is chosen is through an Appraisal Mangement Company. The lender sends in the order for an appraisal to them and they then pick your appraiser.

The biggest problem with this is that some appraisers are appraising properties in areas that they are not familiar with. They are also choosing the appraisers by how much they charge. If an appraiser charges less, then the management company gets to keep more, therefore, making that appraiser more desireable to them. Not necessarily because they are a better appraiser, just simply because they charge less.

We have seen a lot of experienced appraisers simply leave the business. They were making $400-$450 per appraisal and now they are making half that amount since they have to give some of the fee to the management company. They also can not control their business flow any longer since they are on somewhat of a lottery system with management company. This is a shame because these were the guys that were able to appraise a unique property correctly. Just about anybody can appraise a property in a tract subdivision where all of the houses look the same and are about the same square footage, but when you get into a property that has let's say half an acre of land in an area that has mostly quarter acre lots, that takes a little more work.

So the moral of the story is that even if you think you can find a buyer for your home at your desired asking price because the upgrades are so fantastic. Be aware that the appraisal could blow up the whole transaction. It appears that lately the appraisers don't care that you have granite when the comps have formica. Or that you have real hardwood floors in beautiful condition while the other comps have worn carpet. To them flooring is flooring and countertops are countertops. They appear to be ignoring upgrades. What this means is that if a house down the street just like yours sold because it was not in the best condition, that sale may have set the price for your neighborhood even though it is not typical for your area.

So price your home to be 3%-5% below the neighboring homes and you will not only sell faster and probably for more money, but you will also be able to pass that almightly appraisal.

If you have any questions on the value of your home in the Salt Lake City area, don't hesitate to call me, Patty Purdue, at 801-792-1257.