Is Your San Diego Home Appraisal
Really Accurate?
Working generally as a listing broker, I always receive
calls from appraisers who want to verify 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.
About two years ago, the frequency of these appraisal
calls declined 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 belief, 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 receiving a true reflection
of their prospective 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 exact 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 practice, 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 remedy to this problem would be a State
requirement that appraisers of residential properties
use due diligence to validate 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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