Last week Rich and Steve had a great conversation with
Jim Houle, from James Houle and Associates, a Portsmouth, RI based Real Estate Appraisal and Consulting firm. We have heard how low appraisals are killing sales, while this may be partly true, it does not tell the whole story. New Appraiser Independence Requirements replacing the HVCC this month do little to change the underlying problem, Appraisal Management Companies (AMC's) pay appraisers about half of what an appraiser would normally charge and you get what you pay for, inexperienced/incompetent appraisers spending little time researching the comps. Jim has over 30 years experience and agrees that it is a very challenging time for his industry, but things are getting better. First we should address Market Value, many of today's buyers have been on the sidelines for quite some time, and they know what is and isn't a good value, so if a buyer chooses a higher priced home, among more competitively priced properties, there must be a reason. Above average listings
should sell quicker, and for more money, if the appraisals are hampered by conservative valuations, the selling agent should be armed with facts to support the prices. Jim recommends that brokers be present for the appraisal to offer pertinent information about the property and comps in the area. As foreclosures continue to impact house values, how should an appraiser take that into consideration? Presently four states are considering legislation that would prohibit appraisers from using foreclosures as comps, but doing so would result in appraisers failing to comply with the Uniform Standards of Professional Appraisal Practice (USPAP), so we will see how that pans out. Since distressed sales are part of the new reality, I feel they should be used, but used accurately. Appraisers should take the time to research the condition of the comps. A distressed seller may sell below market to avoid further action, and bank owned properties might be priced under market too, just so they will move the quicker. Often there are extra costs such as unpaid liens, rehab needs, unpaid fees, etc, that add to the cost, these should be factored in as well.
This Week's Real Estate Insight Assigning value to real estate is difficult in any market yet recent attempts to regulate them have created more problems. Appraisers should be able to thoroughly research subject properties and they should be compensated appropriately. Listen to this week's podcast here: [audio src="https://www.residentialproperties.com/blog/wp-content/uploads/2011/13/REI_04_10_2011.mp3"]
