Are Appraisals Accurate?

September 15, 2020
Are Appraisals Accurate
With homes being bought and sold at a rapid pace, historical data can struggle to catch up finding the balance between agreed-upon price and the value.

 

Recently, HousingWire reported surging loan volume and record low interest rates are putting excess pressure on appraisal turn times. As a follow-up, appraisal experts said those same variables are having a profound impact on an age-old conflict of appraisal reports versus what the market believes the home is worth. In an accelerated environment with homes being bought and sold at a rapid pace and market data being pulled ahead of time, historical data can struggle to catch up and create broad differentials between an agreed-upon price and the value, said Mark Johnson, president of LRES Corporation. According to Johnson, when markets accelerate quickly, the credit risk gap widens between the agreed-upon purchase price and what the data reflects and advises loan production teams to explore avenues to understand this delta. “Most AMCs offer a process called a Reconsideration of Value Request, or ROV, that when properly presented, encourages the appraiser to review the work based on additional appropriate data submitted. To consider an ROV, appraisers are most often willing to review and consider comps that are more recent, more proximate and more similar,” Johnson said. Some experts mentioned that the increase in bidding wars may also disproportionately reflect the values of like homes in a neighborhood. With homebuilding back up after a short pause at the beginning of the pandemic, experts said the housing stock will vary in ratings as more people leave their homes rather than age in them. All appraisal experts were in agreement that a lack of communication is a breaking point for the expectations of what the home is worth in collateral. Joni Pilgrim, CEO of Nationwide Appraisal Network, said 99% of the time, there are zero details about the subject property prior to the appraisal, transforming the appraiser into the messenger in those cases and running the risk of an extended appraisal turn time.

Source: HousingWire