Appraisals torpedo some home sales as local market heats up
March 30, 2013|By Mary Shanklin, Orlando Sentinel
A young couple, both doctors, thought they had themselves a deal when the owners of a Windermere house agreed in January to sell it for $460,000 — $15,000 below the asking price.
But then the property appraisal came back for $130,000 less than the buyer and seller had agreed the house was worth. That killed the deal.
"My buyers went and bought something else," Lake Mary real-estate broker Nancy Pombo said. "And those people who were selling that house were looking at buying another house — they wanted to downsize." Instead, they took the house off the market.
"It's like a chain reaction," she said, "and it's affecting buyers and sellers."
Mortgage companies routinely require appraisals on home purchases to help ensure that a lender can get its money back if a buyer later defaults on the loan and the lender has to sell the property. But appraisals are particularly challenging in a fast-changing markets, such as the current one, because they are based on previous sales.
In the core Orlando market, for example, resale prices have risen more than 10 percent in just the past six months — more than they usually increase during an entire year when the market is stable.
"Buyers and sellers are agreeing to prices that haven't been supported with current sales," said Brian Watkins, president of Accusured Management LLC, a residential-real-estate appraisal-management company based in Longwood. "The appraisal may be $4,000 down from the sales price, and each side [buyer and seller] ends up compromising on something."
No one tracks the gaps between appraised values and contract prices on home sales, but in a survey released in January of 3,586 real-estate agents nationwide, about 10 percent of the agents reported sales that had been canceled during the previous three months because of appraisal problems; 10 percent also reported that sales prices had been driven down by appraisals; and 10 percent blamed appraisals for delaying some deals.
Appraisers know that home values are rising again, but they're reluctant to demonstrate that in their appraisals for fear of push-back from lenders, according to the survey, issued by the National Association of Realtors