Sacramento Real Estate Appraiser

One of the biggest complaints I hear and read about is that appraisers are only using the most recent sales instead of current listings. The thought is since the market is increasing, appraisers end up low-balling every appraisal because they don’t really (or cannot) use listings. Is that how it works?

Listings Show the Direction of the Market: First off, listings are important for any real estate market because they can help illustrate the trend of values. When listings are lower than the most recent sales, it probably indicates the market is declining, while higher listings show the market is likely increasing. If listings are priced similarly to recent sales, it shows values are probably stable. This is a basic real estate principle, but let’s be honest that sometimes appraisers clearly misinterpret this phenomenon. At the same time there are also many cases where properties are simply priced too high for the market. Maybe the owner or agent was too aggressive or didn’t pay close enough attention to neighborhood trends. Or maybe an investor picked the wrong “comps” when trying to flip a house. I’m not looking for a pity party for appraisers who got it wrong by any means, but let’s be realistic about other parties missing the market by incorrectly pricing a listing.

A Date of Sale Adjustment: Contrary to some opinions out there about appraisers NOT being able to consider listings, appraisers have what is called a Date of Sale adjustment which allows them to adjust for any value difference that has occurred since the comparable sales went into contract. For instance, if all listings are higher than the most recent sales and other metrics also show the market is increasing, appraisers can give an adjustment to each comparable based on how much the market has increased since the CONTRACT DATE (not the close of escrow) for each respective comparable sale. In short, it is a myth in real estate to believe appraisers cannot use current listings in a valuation. That’s simply not true.

Of course the real question is whether appraisers are giving these adjustments or not. This one “Date of Sale” adjustment or lack thereof can be the X-factor in an appraisal being accurate or not. If you feel the appraiser did not give an adjustment, you should dispute the appraisal and ask the appraiser in writing to explain why this adjustment was not given. You may want to ask why a Date of Sale adjustment was not given to comparable sales when listings seem to be priced higher. While you’re at it, make sure to review the appraisal and look for the most important things that really impact value.

Question: Any questions, stories or thoughts to share? Feel free to comment below.

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