APPRAISALS COMING IN UNDER CONTRACT PRICE B/C MARKET’S SO HOT
We are seeing appraisals come in under contract price more frequently than normal again b/c the market is so hot and buyers are bidding so aggressively.
This is not b/c our appraisers are not trying to support contract price; it is b/c appraisers simply lack sufficient comparable sales data to support the contract price.
Along that vein, I want to repeat a few appraisal reminders.
CAN’T IGNORE LOW COMPS
In this blog, Why Appraisers CAN’T Ignore Low Comps, I talk about an appraisal that came in $25,000 under contract price.
The agent sent us numerous comps that would have supported value beautifully – but for the existence of more recent and more similar comps.
The agent, unfortunately, sent us comps for much newer homes that had closed eight months earlier. If there were no other comps available, the appraiser could have used them.
But, there were several comps that sold for much less, that were closer in age, and that closed within four months of our appraisal date – arousing all kinds of concerns.
WHY AGENTS NEED TO SHARE LOW COMPS – WITH EXPLANATIONS
In this blog, Why Agents Need to Share Low Comps, I talk about a particularly low comparable sale that should not have been ignored b/c there was a very strong explanation as to why it sold for so much less (the entire home smelled like cat urine).
There was no mention of that in the MLS or anywhere else, but most of the agents in the area were well-aware of it.
The point I was making again is that it is often better to employ low priced comparables, with strong explanations in regard to why they sold for so little, than it is to ignore them.
The reason to share low comps with explanations is b/c both human and automated reviewers will always see ALL of the low comps.
If low comps are ignored, suspicious underwriters will call for appraisal reviews; suspicious review appraisers will sometimes cut values significantly if they sense anything is awry; and automated appraisal review software will assign too high of a “risk score” to the appraisal, making it unusable in any case.
Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167
