The Appraisal Mess and How It's Hurting Home Sales
Hubby and I just bought a new apartment on Tuesday. We are SO excited. We have been living in a studio for four years, with a bed that folds out of the wall, a la the Marx Brothers. The place is too small for a desk, so I wrote my book on a laptop, alternating sitting on the floor and sitting on the sofa. My back still isn't over it.
However, the studio is still, in terms of New York City, a big deal. We are two blocks from Time Warner Center, an upscale mall with a Whole Foods, a Borders, and a Hugo Boss store, not to mention multi-million dollar apartments. So even the little studio we are in is worth somewhere north of half a million dollars. Recent post-crash comps in our building came in at $565K and $585K, respectively.
So I was pretty surprised when our mortgage bank appraised our condo (it's not unusual, for purposes of making out a new loan, that the bank values your existing assets) at $400K.
When I pointed this out to my real estate lawyer at our closing, he said, "it's happening all over. Appraisers are afraid of being sued."
Now we're not selling the condo, so it's not a problem for us, but the National Association of Realtors sure is freaking out. I'm a member, and Charles McMillan, the NAR president, sent me an email two hours ago, assuring me that on Tuesday he's meeting with the director of the Federal Housing Finance Agency "to discuss ways we can work with Fannie Mae, Freddie Mac and lenders to ensure that appraisals are accurate."
Part of the problem is that the new appraisals aren't very thorough. Our apartment, for example, was appraised in what is known as a "drive-by," That's just what it sounds like. He or she appraised our apartment by looking at the outside of our building.
Did the appraiser walk through the lobby, say hi to our doorman, open our front door and admire our kitchen? Big. Fat. NO.
it's not just New York. In the Washington Post, Elizabeth Razzi mentions how bad appraisals are hurting real estate in her area, too.
One of the fascinating points in her column is that there are two sides: while sellers generally don't want appraisals to come in crazy low, the buyer of a short-sale house is just fine with it!
Has an appraisal hurt a recent deal in your area? Write in and let me know.