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Copyright © 2006 by
Bob Schwartz
San Diego
real estate broker
Certified
Residential Specialist
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Is Your San Diego Home Appraisal Really Accurate?
Working generally as a listing broker, I frequently receive calls from
appraisers who desire to validate the reported MLS sales price, ask about the
condition of the property and if the seller gave any buyer concessions. When I
say concessions, I am referring to payment of buyer's closing/loan costs or
adding some improvement to the property prior to the close of escrow. Obviously,
the appraisers were trying to do their best to ensure that their appraisals
would match the true resale value.
Almost two years ago, the frequency of these appraisal calls began to diminish
and for the last 18 months or so, I personally have received possibly just one
such call for my last six sales. I’ve confirmed the phenomena of these vanishing
appraisal calls with other local brokers. I also called a few appraisers, but
just one would talk about this and only after assurance of anonymity. This
appraiser originally said with the new State licensing law there were many more
new appraisers and questioned their competency. When pressed, he very
reluctantly conceded that my assumption that the real pressure to bring in the
appraisals at the contracted purchase price (all resale appraisers have a copy
of the purchase contract prior to inspecting the property) was causing them not
to question the listing broker on condition or especially, seller concessions.
It’s my view, in our current San Diego real estate market, that it is
exceedingly rare for a buyer not to get concessions from the seller. I’m not
talking small change here; these real life recent sales show:
La Mesa $362,000 sale - $4,500 credit to buyers
San Carlos $480,000 sale - $14,400 credit to buyers
Mission Valley $360,000 sale - $10,000 credit to buyers
San Carlos $385,000 sale - $10,000 credit to buyers
So, are the buyers who are now paying approx. $375 for a residential appraisal
really acquiring a true reflection of their impending new properties value? If
an appraiser looks at the $480,000 sale above, as a comparable without inquiring
about the concessions ($14,400 in this real example) the appraisal will be too
high. If the appraiser does inquire about the concessions, they have to consider
the comparable property was worth not $480,000 but $465,600!
Without payment of the concession, it is not likely that this property would
have sold. If the real facts did cause the new appraisal to come in below the
contracted purchase price, the buyer (paying for an accurate appraisal) would be
not be obligated to go forward with the sale. In today’s strong San Diego’s
buyer’s market, the buyer would be in a very strong position to have the seller
reduce the sales price to the accurate appraised value and thereby potentially
save thousands!
I’m not a licensed California appraiser, just a California licensed real estate
broker with three decades of residential experience, Many may not be in
agreement with the fact that these concessions reduce the real resale value of
properties. I can understand their opinion. But, I think they are dead wrong! No
seller I know, is willing to give away thousands of dollars of their equity if
they could avoid it. This is a classic example on the part of pressured
appraisers, of hear no evil, see no evil!
The easy correction to this problem would be a State requirement that appraisers
of residential properties use due diligence to confirm the full details of all
comparable sales used in an appraisal. Until this happens, I would advise buyers
to tell their mortgage lenders that they want a copy of the appraisal and will
be looking for some notation on the document showing that the appraiser made
inquiry into both the condition and possible concessions on each comparable
used.
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