One out of ten Realtors (11 percent) report that low appraisals are killing home sales contracts and an addition 10 percent say they are delaying closings, according to an April NAR practitioners survey of Realtors. Some 14 percent report that appraisals coming in under the purchase price are sending purchase deals back to the negotiating table.
The appraisal problems echo those encountered by home buyers and their lenders last year when a controversial rule called the Home Valuation Code of Conduct (HVCC) created chaos in the appraisal business, resulting in what many felt were appraisals that didn’t reflect the true values of properties.
However, last year’s Dodd-Frank Wall Street Reform and Consumer Protection Act killed the HVCC and The interim final rule for appraisers, part of the will be effective April 1, 2011, and is designed to keep appraisers independent, free from third-party pressure, and compensated fairly. The final rule implementing the Dodd-Frank appraisal changes took effect April 1.
However, even though it was published in February the final rule doesn’t seem to be making any impact on the market at all. Low appraisals are still killing deals at the same rate that they were in March, according to the NAR survey. Virtually the same number of Realtors reported problems with low appraisals in March; some 10 percent of Realtors reported they had lost sales and 12 percent said their deals were delayed.
“Appraisers are now home inspectors and offer condition opinions that will undoubtedly kill a deal,” commented one Realtor taking part in the April survey. “Short sales and foreclosures are still priced too high by the lenders, who do not believe the agents information concerning actual market conditions,” said another.