We have a transaction in which two buyers (both are clients of ours) are more than willing to pay $1.2 million for a property in Oakland with an appraised value of only $950,000. There are probably more buyers in the wings willing to pay a similar price. The appraisal came in so low b/c of a lack of sufficient comparable sales in the immediate neighborhood.
Given the number of knowledgeable buyers willing to pay well over the appraised value, the “market value” is clearly much higher than the appraised value. In markets like this, appraisal reports themselves are almost a fiction when talented appraisers are tied down by irrational appraisal guidelines (the appraiser who appraised the above property is talented, smart and highly experienced, it should be noted).
Solution?: Back “in the day,” lenders allowed the use of copies of other offers as data sources, and as reasons to appraise a property above the range of comparable sales. Appraisers could literally attach back-up offers to appraisals. Appraisers had to verify they were authentic by contacting listing agents. Lenders need to allow a variation of this guideline to return.
In the meantime, buyers need to understand that appraised values often do not reflect market values, so they don’t panic when an appraisal comes in low.
Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646
