Erin Attardi's Sacramento Real Estate Blog

Last week I had an experience with an appraisal gone awry. The appraisal value was deemed substantially lower than the contract price for my listing, which obviously threw a wrench into an otherwise smooth transaction. Luckily, I was able to obtain a copy of the appraisal. I found a few errors in the appraisal, made my case, and thankfully it was revised. Phew! Problem solved...for now...

Starting in May, real estate agents and lenders will not be allowed to have any contact with appraisers. Lenders will be ordering their appraisals from large "Appraisal Management Companies" (as opposed to directly from the appraiser himself) that take a cut of the appraisal fee off the top, and farm appraisal orders in mass to registered appraisers. Follow the link to read the new rules imposed by the HVCC (Home Valuation Code of Conduct).

While I do understand the rationale behind this new law, I think it creates a whole new set of problems.

• Instead, appraisal issues like the one I experienced last week will not be resolved. Agents will not receive a copy of the appraisal, nor will agents be allowed to contact the appraiser.
• Appraisers will be forced to try to do the same work for less compensation. An appraisal fee is usually anywhere between $350 - $450...with the management companies taking a bite out of that fee, appraisers will be expected to turn out the same quality of work for less money...either that, or I imagine the cost will be passed along to the consumer, making appraisale more expensive.
• Out-of-town appraisers will be determining values for areas in which they are not familiar. The management companies will be dispatching appraisers from all over northern California to do Sacramento appraisals. Gee - Land Park vs Oak Park...Arden Park vs Arden Manor - they are close enough together, so they must be comparable, right?

Wouldn't a better solution be to crack down on the shady appraisers, lenders, and agents?

With bank owned and short sale property listings being the rule now, rather than the exception, those listings have quickly become the yardstick by which other non-bank owned and non-short sale properties are measured. Ugh.

Case in point...I have a perfectly gorgeous listing in a foreclosure/short sale-prone area, where no expense was spared with upgrades and attention to detail. I listed the property and within days had multiple showings, and in turn, multiple offers. So, we negotiate and the seller accepts one of the offers, escrow is opened, inspections performed, and things are truckin' right along....until the appraisal. For those of you who don't know, the appraisal is an unbiased estimate of value by a state licensed Appraiser, and is the report what the buyer's lender uses to measure the value of the house for lending purposes.

Literally ALL of the recent comparable sales are inferior properties - unlandscaped, dirty carpet, needs to be repainted, has the standard white tile/oak cabinets...not apples to apples to my listing at all, however, they are the new yardstick for making adjustments up or down to the value of my listing.

So the appraisal came back today $15k under our contract price. Ouch.

Well...the good news is that I just finished pouring through every detail of the appraisal report, and found a few CRITICAL errors. The most notable (and easiest to explain) is that the appraisal report shows my listing as a 4 bedroom home, when it is actually a 5 bedroom home...the outline of the floorplan shows 5 bedrooms (and there ARE 5 bedrooms), but the appraiser made an error when doing the side-by-side analysis. This resulted in a negative adjustment of $5k across the board...so with any luck, we can get the report revised.

Anyway - the moral of the story is just because you have a gorgeous home, your upgrades and improvements do not necessarily translate into big bucks on your appraisal. I wrote a blog post about this a couple weeks ago...