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The Truth About Appraisals in Today’s Housing Market

by Peter Thomas Ricci

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Mark Zipperer, the broker/owner of RE/MAX Edge in Wrigleyville, felt pretty confident about the condo he was selling in Buena Park. Not only was the condo on the 17th floor in a building that he knows intimately; not only did it face east and feature a “million-dollar view,” as he put it, of Montrose Harbor; not only had he lived in Buena Park for more than 20 years, and in those years, become a market expert; above anything else, Zipperer had the unit under contract, and for what he considered a fair, agreed-upon sale price of $125,000.

And then the appraisal results came in. Though Zipperer was no stranger to the appraisal process, and though he had previously experienced difficulties on appraisals with units he and his agents had dealt with, it still shocked him when the appraiser delivered his valuation – and had valued the unit at $105,000.

“I almost fell out of my chair,” Zipperer says.

Driven to learn the source of the low valuation, Zipperer studied the comps the appraiser had used, and learned the following facts: first, one of the comps the appraiser used was located in the same building, and the unit, coincidentally, was also one Zipperer had sold; however, the unit was not only on the seventh floor, as opposed to the 17th floor, but it was also a short sale, and one that had gone under contract a year earlier. Second, though the appraiser had made a $10,000 adjustment for height, he had made no adjustment for the lake view of Zipperer’s unit (the comp did not feature views of Lake Michigan), nor an adjustment for the comp’s distressed sale. And third, the appraiser had further adjusted his evaluation using another high-rise unit in the neighborhood, and specifically cited the unit’s balcony in his notes – the problem, though, was that one of Zipperer’s agents had sold that property, and distinctly remembered that it did not have a balcony.

The experience, along with his previous frustrations, has left Zipperer with a distinct impression of the appraisal industry.

“This is why I think the entire industry should be [reevaluated],” he says. “They have internal issues that they have to solve. They are killing our business.”

And Zipperer is certainly not alone in his sentiments. In the latest Realtor Confidence Index from the National Association of Realtors, which surveyed NAR members in March, 29 percent of the Realtors sampled reported experiencing problems with appraisals, with 10 percent reporting a lower negotiated sales price as a result and nearly 10 percent reporting contract failures.

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Comments

  • Maribeth Tzavras says:

    This is one of the best articles I have ever read! Extremely informative, educational, accurate and right on target! I experience all of the same frustrations and have unfortunately become an ‘expert appraisal reviewer’ due to issues I’ve experienced. Thank you! It’s reassuring to read my own analysis and beliefs in print.

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