Headline - Wall Street Journal - August 12, 2011
August 16, 2011
On Friday, August 12, 2011, there was a headline on the front page of the Wall Street Journal that read "Judgement Call: Appraisals Weigh Down Housing Sales". A fallout of the housing bust is the revamping of the appraisal process.
Admitting that during the boom years there were appraisals that inflated the value of a property, the regulators have established a system that often deflates the value of the property. Appraisers are assigned from a central appraisal management company and may or may not be familiar with a particular local real estate market. Since the process was put into place, the system has mostly rectified this flaw, but real estate sales are still subject to the opinion of value of the person assigned to the task of valuing the property.
Appraisals are part science (comparison to recent sales) and part art (valuing amenities). Appraisers and lenders need to judge whether a particular real estate market is in a declining mode, a stable mode or a rising mode. Generally lenders and appraisers consider most markets to still be declining. A low appraisal can mean a cancellation of the sale if the buyer does not have the funds to make up the difference or the seller will not or cannot come down in value.
At one time a willing and capable buyer and a willing seller would negotiate a selling price that was considered to reflect market value. Now no matter how willing a buyer is to pay a price or a seller is to take a price, the lender, based on the appraisal, has the determining voice in establishing market value. Perhaps this determining voice has held back any appreciation that might exist. We have been though a major readjustment in home values, and it would be helpful if we could put a bit more weight on the willing buyer and willing seller.
On Friday, August 12, 2011, there was a headline on the front page of the Wall Street Journal that read "Judgement Call: Appraisals Weigh Down Housing Sales". A fallout of the housing bust is the revamping of the appraisal process.
Admitting that during the boom years there were appraisals that inflated the value of a property, the regulators have established a system that often deflates the value of the property. Appraisers are assigned from a central appraisal management company and may or may not be familiar with a particular local real estate market. Since the process was put into place, the system has mostly rectified this flaw, but real estate sales are still subject to the opinion of value of the person assigned to the task of valuing the property.
Appraisals are part science (comparison to recent sales) and part art (valuing amenities). Appraisers and lenders need to judge whether a particular real estate market is in a declining mode, a stable mode or a rising mode. Generally lenders and appraisers consider most markets to still be declining. A low appraisal can mean a cancellation of the sale if the buyer does not have the funds to make up the difference or the seller will not or cannot come down in value.
At one time a willing and capable buyer and a willing seller would negotiate a selling price that was considered to reflect market value. Now no matter how willing a buyer is to pay a price or a seller is to take a price, the lender, based on the appraisal, has the determining voice in establishing market value. Perhaps this determining voice has held back any appreciation that might exist. We have been though a major readjustment in home values, and it would be helpful if we could put a bit more weight on the willing buyer and willing seller.
posted by shirley harry at 9:15 AM
0 Comments:
Post a Comment
<< Home