The issue of “low appraisals” and deals being “lost” in the Atlanta real estate market because of poor appraisal quality is one that isn’t going away anytime soon. Agents continue to share stories of seemingly solid Atlanta real estate agreements gone bad as a result of an appraisal that failed to support the contract price. The consequences are not pleasant and some deals will fall apart, other times sellers accept less to get the deal done, buyers add cash to increase the down payment or agents might give up part of their commissions. While the idea of challenging an appraisal may seem logical, most often it is a fruitless endeavor as underwriters tend to be inflexible.
The issue of low appraisals in improving markets, like many in Atlanta, can be especially troublesome as appraisals tend to use historic data (sales). Those will lag behind current active and pending homes and trying to support what appears to be an improving market with older, lower valued sales can be a bear. This has lead to an entire new discussion, one that asks are appraisers scared to report rising home prices?
Well when it comes to how much of a problem low appraisals are, there’s a disconnect between agents and appraisers. Many realtor organizations have stated that the “failure” rate of purchase appraisals runs as high as 55%-60%. Informal agent opinions expressed mainly through blogs, newsletters and surveys tend to show issues between 15% to 35% of the time. Appraisal Port just completed a survey of appraisers to get an opinion from them. There doesn’t seem to be the same view from the appraisal side.
No doubt issues exist and will continue to exist, micro management from Washington has done nothing but hurt the industry as well as the recovery…but that’s another topic.