We have an excellent pool of hand-picked appraisers that I tout often as a competitive edge.
I tout them often b/c we used to get burned all the time when we were forced to use giant Appraisal Management Companies (before setting up our own appraiser pool).
Several months ago, one of our appraisers came in about $40,000 under contract price for a $600,000 purchase.
The sellers and agents were upset by this, insisting our appraiser was incompetent – something we hear all too often.
They also sent us comparable sales that were not actually “comparable” b/c they were too old, too big, too far away, etc.
Our appraiser had come in at the absolute top of the “range of values” provided by ALL of the comparable sales that she was allowed to use per appraisal guidelines.
I discuss those “allowable comparable sales guidelines” in detail in this short blog. I highly recommend reviewing it.
RANGE OF VALUES
Every appraisal provides a range of values indicated by the comparable sales after appropriate adjustments are made for size, amenity, location, updating and other differences.
That range is rarely “tight” or cut and dried, as there can be large variances.
Knowing where to come in relative to the range is a purely subjective judgment call, but our appraisers are very good about correlating to the top of those ranges when necessary to support the contract price.
Anyway – our appraiser above did everything perfectly and we knew as much b/c our Appraisal Manager is a seasoned appraiser herself and she well-knew there were no other comparable sales to justify a higher value.
In light of this, if the appraiser had come in higher, the underwriter would have very likely called for a review and the appraisal itself would have ended up sliced to ribbons.
PROPERTY BACK ON MARKET AT MUCH LOWER PRICE
Long story short: The sellers refused to budge b/c they had been convinced their value was much higher, so the deal died.
The property is now back on the market with a $30,000 LOWER listing price and it still has not sold – even though the market is hotter than ever.
This is just one of many examples of our appraisers being right – as is the case more often than not.
Founder/Broker | JVM Lending
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