The housing boom and subsequent bust, now slowly unfolding across the country, have made a real mess of the once highly-respected profession of real estate appraiser.
After stressful years of being asked to "hit the number" (i.e., come in with an appraisal value high enough to match the purchase offer price), there must be at least a few appraisers snickering these days as sellers accept prices far below "fair market value" amid the worst housing downturn in recent history.
This Washington Post story fills in some of the details.
going on with appraisals in some parts of the country? Mortgage lenders
and appraisers say they're increasingly coming in with valuations higher than the contract prices agreed to by sellers and buyers. The differences can range into the thousands.
We're seeing it a lot now. Appraisals are coming
in higher than the contract," said Patrice Yamato, president of Plaza
Mortgage Group in Jacksonville, Fla. It's a reversal of the pattern during the housing boom years, when appraisals often came in at or occasionally below the contract price.
"I think buyers are pushing very, very hard," Yamato said, and they're walking away with steals.
Note to potential buyers: Many of today's steals will be next year's upside-down mortgages. Why do you think you're getting such a good deal at 10 percent off the asking price or 15 percent below the peak price after a 200 percent run-up in many parts of the country?
Do you really need to buy a house that badly? Even Money Magazine is now encouraging its readers to consider renting instead of buying in this market.
all appraisers are surprised that appraisals are beginning to come in
above contract prices. Gary Crabtree, president of Affiliated
Appraisers in Bakersfield, said bloated sales prices over the last five
years, plus hidden concessions and fraud, "have distorted the data" and the public records in some parts of the country.
mortgage fraud and concessions get built into" local recorded sales
prices and tax assessments, he said, those inflated values "become the
new comparables" that appraisers use. In effect, hard-bargaining buyers
may be squeezing some of the fluff out of earlier sales.
Frank K. Gregoire, a longtime appraiser based in St. Petersburg, Fla., and chairman of the Florida Real Estate Appraisal Board, said that when the market is moving, appraisers "have to look not only at closed sales and current listings" but also tap into sources of dynamic information, such as realty agents who specialize in the micro-market where the property is located and who know how fast the inventory is building, where the concessions are buried and what's motivating active buyers.
Well, it appears that the market is now moving again after a period of mostly flat prices during much of 2006. Unfortunately for sellers, this time the direction is down. That means that in some parts of the country, homes are not just losing thousands of dollars in value, but thousands of dollars per month.
In California, back when the bubble was inflating at its fastest pace and home prices were the constant subject of cocktail party chatter, it was not uncommon for fairly ordinary homes to appreciate at a rate of $10,000 per month.
Many of those same homes are now losing value at almost the same pace, though it is unlikely that this is much discussed when homeowners meet over drinks.
The appraisers, however, are probably having a blast swapping stories when they meet at cocktail parties.