How an out of area Appraiser can kill a deal. Yes It Can Happen!
So your seller has an offer, Escrow opens and its time for an appraisal. The lender is in another county and they send in an out of area appraiser. Now the fun begins. Is buying your dream home in Palm Springs in peril? Is selling your home going to be tough?
First allow me to say that most appraisers are good people, they work hard and they don’t get paid enough for the amount of work they do. With that, there are more reports than usual about buyers who choose an out-of-town lender for their mortgage. That lender then sends in an appraiser who does not know the area and the market. What follows is a time of nail-biting as we await the results. And many times, it’s not good.
What can go wrong with have an out of area appraiser they may not have a thorough knowledge of a variety of things. Areas of concern are knowledge of the neighborhood, the development or the street. Valuations may be off, comparables applied or adjusted incorrectly and adjustments for features, views and lots may be way off.
We had this happen just recently to a client whose home was in Escrow. The appraiser came in from Orange County and appraised the house 12% under the offer which had been fair. At least both the buyer and seller thought so. We went to work to challenge the appraisal but to no avail. In the end, with some work on both sides, we got the deal to move forward but bottom line is our seller was caught short.
Most appraisers are competent and provide good valuations that are compliant with the Uniform Standards of Professional Appraisal Practice. However, appraisals generally lag market conditions and some changes to the appraisal process have caused problems in recent years, including the use of out-of-area valuators who lack local expertise, full access to local data, inappropriate comparisons, and excessive lender demands. In addition, before the beginning of last year, some lenders’ loan processors edited valuations, cutting them by a certain percentage.
So what can you do? Not much.
The system is designed with stiff regulations and penalties that could cost the appraiser plenty if they vary from procedure or protocol. You could be selective in accepting an offer and ensure that the buyer is using a local lender. And you can stipulate in the contract that a local lender must be used. Or that they may not use out of area appraiser. That may put off some buyers but if the home is appropriately priced and marketed, there should be sufficient buyers in the pool.
Or you can hold your breath and take your chances……..
550 S Oleander Rd Palm Springs, CA, 92264 USA
firstname.lastname@example.org • 760-413-2871