This post on appraisal problems and appraisal solutions is from Alabama but it sounds like most of it applies perfectly to Arizona appraisal problems as well.
Appraisal Problems
- Appraiser did not include my updates
- Appraiser did not know my area
- The recent FSBO sale down the street was not included in my appraisal
- Appraiser did not come into my house
Appraisal Solutions
CLICK HERE to go to the original post and see the proposed solutions.
Have you had a problem with an appraisal? Please talk about it in a comment below.
FYI, it’s been my experience that Arizona appraisals done for refi loans come in a lot lower than appraisals done for purchase loans but I don’t quite have the “why” figured out. Is it because Arizona appraisers just want to make their clients happy?
10 Responses to Top 5 appraisal problems and solutions
Clients always ask me why purchase contract appraisals tend to come back right at the sales price (unless it comes in well short), and the short answer is that the appraiser has the benefit in the cheat sheet. They tend to look at the purchase contract as a target rather than coming to their conclusions independent of that knowledge. To be honest, it makes our lives, as agents, easier, but for a true estimation of value, it really should be blind. I think this is why refi appraisals tend to lag. There is no meeting of the minds (as is the case between a buyer and seller) that the appraiser can use as a target, so the results swing a bit more wildly. It’s a truer opinion of value in my estimation, even if it often results in more headaches.
Like you say, I’ve never seen an purchase appraisal come in a little below the contract price. If it comes in low, it’s $5,000+ or $10,000+ below the contract price. Never just $1,000 low.
A low appraisal is a PITA for everyone. I imagine the appraiser thinking, “Am I so sure that it’s $1,000 low that I’m going to cause all these problems and get all these people hating me? No, I’m not. Purchase price is close enough.”
There is a value to 2 people coming to an agreement on price, nothing is worth anything unless someone is willing to pay for it. So a close appraisal value, is given the purchase price. That is how I explain it to my clients.
Appraisers are generally very good but I’m still smarting over an appraisal of a Scottsdale home years ago from an appraiser based on the West Valley. He used as a comp a home that essentially backed to Scottsdale Rd! He didn’t adjust the value at all for that terrible location! And so the appraisal came in low. We had to renegotiate price and it ended up costing my client, the seller, about $10K on a $400K house. I’m still annoyed.
John, I do think that issues like backing to a main road or power lines are sometimes downplayed in appraisals. For buyers, these issues usually have a major impact the amount they are willing to pay for a house.
I should add that last year I sold a house where my (all cash) buyer clients paid MORE than appraisal and were fine with it.
Again it was related to the backyard but in this case the house had an unusually nice setting backing to HOA property and with nice open views. The appraisal didn’t capture the value of the lot’s pleasant setting to my clients so they were fine with agreeing to pay above appraisal. Obviously the seller believed the home had value the appraisal didn’t capture.
My clients had seen enough homes over a few buying trips to Arizona that they knew well what their other options were.
I think the points made above are excellent. I also think the appraisal process works well the vast majority of the time. Unfortunately, the human element is there and it is not always perfect.
To overturn a bad appraisal is a nightmare but it truly needs to be done in some situations. As John mentions, mistakes can be made. I’m sure we all have war stories from the random appraiser that will use an Ahwatukee patio home when comping a place less than a mile from ASU. ( yes, really )
Wow! I bet that appraisal created a TON of work for you to fix, Nick. I’m impressed! Now I know who to talk to next time I get a bad appraisal. :-)
While the concern is typically on appraisals that come under value, recently as a listing agent, I’ve had 3 appraisals come in slightly over value (1-2%). This situation doesn’t jeopardize the sale typically, but it shared with the sellers, they can feel like they left money on the table.
Gosh, when I represent the seller I almost never find out the appraised value unless it’s below the price in the contract and the buyer wants to re-open price negotiations.
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