Imagine the agony of a buyer when the bank’s appraiser rules that the apartment the buyer has agreed to pay $750,000 for is worth only $650,000. What then? The buyer has three options: move on, because the low appraisal means the mortgage the bank will give is too small to buy the apartment; scramble to come up with a larger down payment to make up for the smaller loan; or use the appraisal to try to renegotiate the price.Real estate agents, mortgage brokers and appraisers all say that the low-ball appraisal has become increasingly common in today’s unsettled market. The problem is even more pronounced when homeowners are hoping to refinance a mortgage or get a home equity loan, because there is no current agreed-upon sale price as a benchmark, they say.Low appraisals may reflect reality, since prices in New York City have dropped by as much as 30 percent in the last year. But agents, mortgage brokers and even some appraisers say they suspect that some appraisals are mistakenly low. They cite several reasons…
By Vivian S. Toy, Sept. 27, 2009, NYT
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1. Appraisers hard pressed to find valid comparables in an environment where sales volume has dropped almost 50%
2. Recent changes in appraisal rules have resulted in many lenders hiring non local appraisers not familiar with the local market
3. “The least qualified and least experienced people are doing appraisals across the country,” said Jim Amorin, the president of the Appraisal Institute.