17% of Appraisals Don’t Match Sales Price

More than 17% of home appraisals report a value less than the contract price, a trend that could indicate home values have stabilized or appraisers are being more cautious when valuing properties today.

This conclusion was drawn by Platinum Data Solutions, a provider of collateral valuation and risk assessment technologies, which analyzed data collected from FreeAppraisalReview.com.

The site’s data shows that home values have plateaued or that appraisers are simply taking a more conservative approach when valuing properties, said Phil Huff, Platinum Data’s CEO, in a statement.

Advertisement

“When one in five appraisals is lower than the contract price, it’s worth taking a deeper [dive] to find out what property values are doing,” he said. “For example, it could mean that buyers are paying more than a property is actually worth, possibly because the market is starting to stabilize. On the other hand, it could indicate that appraisers are being more conservative in valuing properties, which — given the regulations they’re facing — would be understandable.”

FreeAppraisalReview.com was designed to help appraisers, as well as the lenders and appraisal management companies (AMCs), save time by identifying basic errors and omissions.

Appraisers upload their appraisals to the site, which screens them and reports its findings. In doing so, it enables appraisers to locate and correct the most common culprits of returned appraisals prior to submitting the appraisal report to the AMC.

Returned appraisals are the most frequent grievance among lenders and appraisers because they drain efficiency and reduce profitability, Platinum Data says. When lenders and AMCs catch errors, they return the report to the appraiser for corrections or clarifications. This can cause days-long delays, and a reduction in profit margins for everyone involved: the appraiser, AMC and lender.

“Lenders and investors would be wise to keep their eyes on trends like this,” Huff said. “If frequent lower appraised values are reflective of a stabilizing or declining market, that could present a major impediment to the quality of loans they’re transacting, selling and buying.”

Written by Emily Study

Join the Conversation (4)

see all

This is a professional community. Please use discretion when posting a comment.

  • I would make sure the AMC’s are more than well aware of this. A handful of these folks are more concerned with their $200 than any part of the appraisal that is not correct. Re-inspection = more profit.

  • “Appraiser Independence” equals “No Appraiser Accountability”.
    The cost of appraisals is going up yet appraisers are earning less and therefore have zero incentive to give a valuation that might prompt an underwriter to request additional justification or additional comparables or adjustments. This just means more work for the appraiser for no additional compensation.
    It’s time to dial back this bad idea and go back to the occasional desk review and send the AMC’s packing.

  • First, the 17% is an estimate. Second, there is no estimate as to how much lower than the contract price these appraisals are. Third, the result shows that 83% of the appraisals are at the contract price or HIGHER. Fourth, there is no information of what the same miss rate was in prior years.

    The housing market is anything but a perfect market. The New York Stock Exchange is much closer to a perfect market due to the level of readily available relevant information and the volume of transactions. The housing market has far fewer transactions and the availability of relevant information is not nearly as great.

    Then there is the issue of using comps as the basis for determining value. In an overall rising market, it should be expected that a significant number of appraisals would be different from their related contract price.

    While some in the thread have pointed to other subjective but still important concerns such as lost time justifying values, a 17% variance is within the range of acceptability in a rising market. Without more information, any rush to judgement is just that. What is called for is information about the miss rate in prior years and the average percentage these appraisals were with. There is also the need for the same information about values which were greater than the contract price.

string(84) "https://reversemortgagedaily.com/2014/10/21/17-of-appraisals-dont-match-sales-price/"

Share your opinion