Appraisals continue to hamper deals. In the first six months of the year, one-third of real estate professionals say appraisals have caused a delay or canceling of contracts — that’s up from 29 percent for all of last year, the National Association of REALTORS® reports. Rural areas where similar comparable sales may be hard to find seem to experience more delays. At least we find this in foothill areas like the Placerville, California region.
Lenders are requiring more thorough appraisals, which appraisers are saying requires them to pull more comparable sales, which sometimes may include foreclosures or short sales that sell at discounted prices. Appraisers used to cite about three recently sold homes but now lenders require two to three times that, David Stevens, president of the Mortgage Bankers Association told SmartMoney.
When the appraisals come in lower then the accepted offer — which more frequently is what is occurring — the seller either has to lower their price or the buyer has to pay the difference. From the three months ending September, 13 percent of real estate professionals say contracts were renegotiated to a lower sales price due to a low appraisal, according to NAR data.
Housing experts recommend that buyers add a statement in their contracts that says they’ll receive their initial down payment back if financing doesn’t come through the agreed price or the appraised value is below the offer in the contract, according to the SmartMoney article.
Source: “How Appraisals Are Derailing Home Sales,” SmartMoney (Nov. 4, 2011)