The Boston Globe published an article this week on the way the housing slump is affecting the job of an appraiser. When conducting a real estate appraisal, one of the tools an appraiser uses to determine a home’s value is sale prices of comparable homes in the area. But the large number of foreclosed properties is skewing that number, making it difficult for appraisers to make a proper judgment on a home’s value. Another issue is the current dearth of home sales, which gives appraisers little information with which to make comparisons. When there are no comparable home sales in the area, appraisers have to look at the sales of bank-owned properties, which can also drag down a home’s value. Another way appraisers determine the value of a home is to predict its value next year and balance that with its current value, but the current volatile market makes predictions difficult.
The trend seems to be that a buyer and seller will agree upon a price, but the appraisal value comes back lower than the agreed-upon price, threatening a successful sale. Real estate appraising is less of an exact science in the current economic climate than it used to be and much is left to interpretation. This is why it is more important than ever to work with an experienced appraisal company that you trust.
