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San Diego real estate library
Is Your San Diego Home Appraisal Really Accurate?
Working mainly as a listing broker, I frequently receive calls
from appraisers who desire to confirm 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 doing their due diligence to
ensure that their appraisals reflect the true resale value.
Almost 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 view, in our current San Diego real estate market, that
it is very 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 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 doubtful that this
property would have sold. If the right 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
skill, Many may not agree 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 condition 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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