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.
“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