Valuation Management Group is happy spring is here! Spring is typically the season when sellers get busy listing their property and buyers get busy looking for a new home. As the real estate purchase activity increases, there may be concern that the appraised value will not meet or exceed the contracted purchase price. This is commonly referred to as a “low appraisal”.
Valuation Management Group prefers not to label it as a low appraisal, but rather an appraisal that did not meet the contracted sales price. The appraised value is the educated opinion of the real estate appraiser. The appraiser must follow Uniform Standards of Professional Appraisal Practice (USPAP) guidance and adhere to the definition of market value, which is defined by USPAP as “the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale; the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus.”
Appraisers typically do not consider ‘For Sale By Owner’ or pocket listings as comparable sales. In most instances, these types of sales do not receive market exposure which presents a challenge for the appraiser to confirm it was an arm’s length transaction, the terms of the sale, property condition, quality and other details significant to utilizing a sale as a comparable. Sales not listed in a multiple listing service are often not utilized by appraisers as comparables, as well.
- Scott Murphy, chairperson of the Georgia Real Estate Appraisers Board wrote a recent article on pocket listings which you can access by clicking on the following link:http://www.grec.state.ga.us/PDFS/About/newsarticles/2016GRECRENewsFEBRUARY.pdf
Valuation Management Group has some tips for the lender and potential buyers should the appraisal value not meet the contracted sales price:
- Read the appraisal to determine if it seems reasonable.
- Try not to get too emotionally attached. It is easier to give sound reasoning in the appeal and/or renegotiate the contract if emotions are calm.
- Ask the real estate agents to provide the sales they considered when determining the list price. The sales should be in the same neighborhood, within the last 12 months and of similar size, condition and quality.
- Prepare the reconsideration appraisal appeal in writing. Provide factual information, including possible additional sales for the appraiser’s consideration.
An example of the Valuation Management Group appraisal appeal form can be viewed and printed or completed on line: https://valuationmanagementgroup.com/resources/request-for-reconsideration-appraisal-appeal/
VMG will provide the information that is submitted to the appraiser for their consideration and written response. The appraised value may not change if the appraiser believes the information provided is not relevant to the subject or that it does not impact value. Renegotiating the sales contract price to the appraised value is an option. Another option, if the buyer is convinced this is the home for them, is to pay the original contracted sales price.
Valuation Management Group is a national, full service appraisal management service company that manages the appraisal process for financial institutions, banks, mortgage bankers, and credit unions. We offer the full array of commercial and residential appraisal products and services. We take the appraisal process from ordinary to extraordinary.