Appraisals are sometimes a big issue for buyers and sellers. Never mind that there’s a shortage of journeymen appraisers, which is why it sometimes takes weeks to obtain a valuation. That alone is a major headache. But the main problem is that no matter what the buyer is willing to pay, it’s the appraisal on which the lender bases its decision about how much to lend.
If the valuation comes in too far below what the buyers have offered, they either have to come up with more cash to make up the difference, or the sellers have to lower the amount they’re willing to accept. In today’s market, where there’s no shortage of buyers willing to pay above the asking price, the onus usually falls on the buyer to make good or step aside for the next guy.
There’s nothing anyone can do about that. But at least the process is likely to become more consumer-friendly -- and possibly even less expensive -- under a couple of initiatives put forth recently by two big appraisal-management companies. Both aim to override the shortage of appraisers and lessen the time it takes to learn what the appraiser thinks the “subject property” is worth.
In one instance, Computershare Property Solutions is offering lenders a hybrid type of appraisal in which the valuator never visits the property. Instead, a licensed realty broker or home inspector gives the house a look-see, takes pictures and reports findings to a desk-bound, state licensed appraiser, who uses that information and an automated valuation system to come up with a number.
This type of bifurcated system has been in use for some time by lenders making home equity loans, but it is new to financing used to buy a house, says CPS President James Smith. And he thinks it will be successful because it addresses the lack of experienced appraisers, the high cost of appraisals and the long lead-time between doing the work and handing in a complete report.
“Brokers and inspectors know the property,” so they can present an accurate picture of its condition, Smith says. And while appraisers never see the property, they “can do more work and get more done” by staying glued to their computers.
“At the end of the day,” the finished, hybrid product is “still an appraisal,” he adds -- one that can be turned around in four or five days, as opposed to several weeks for a traditional valuation. And at a much lower cost: $145 as opposed to several hundred dollars.
Meanwhile, HomeBase from Valuation Partners is a link that provides everyone in the process -- the buyer, seller, realty agent, appraiser and lender -- a single, central point of contact so they can remain informed 24/7.
For the seller, it sets the appointment and provides all the pertinent information about the estimator, including a photo, automobile information and appraisal license number. And for both seller and buyer, an educational component informs them about what to expect when the appraiser shows up.
CEO William Fall expects the product to help speed up the long, drawn-out valuation process. “With the seller’s and appraiser’s schedules being what they are, it can be difficult to set up appointments,” says Fall. “But when you know when the appraiser will be there, you can say with almost absolute certainty when his report will be turned in.”
Houses sold faster last year than they ever have, according to Zillow.
Median time on the market, from listing to closing, was just 81 days. But June sales occurred quicker still: in a mere 73 days.
Since it often takes 30 days to get to the settlement table from the day a contract is signed, that means houses sold in roughly 51 days last year, or less than two full months. Of course, some listings languish for months, but others sell within a few days.
Many people move from one house to another to enroll their children in better schools. But that often means paying more for their new digs.
Consider two similar houses: They’re just two miles apart, and in the same Cincinnati neighborhood, but each is located in a different school district. One is valued at $137 per square foot; the other, $217, according to a white paper by Collateral Analytics, a firm that develops analytical tools to support banks and investors.
That’s a difference of 58 percent. The biggest driver, the company’s analysis found, is the quality of education at the schools the residents of those houses would attend.
In Cincinnati, the part of town covered in the report has two high schools. One earns an 8 out of 10 from greatschools.org, and a 10 for college readiness. The other, just a couple miles away in another school district, gets an overall rating of 3, and a 3 for college readiness.
Differences like this can sometimes be magnified at the grade-school level. In Mission Viejo, California, the other locale covered in the study, researchers found a whopping $300,000 spread among nine different elementary schools.
Another report, this one from the National Bureau of Economic Research, seems to solidify Collateral Analytics’ numbers. That report, “Using Market Valuation to Assess Public School Spending,” found that communities’ investment in their schools has a direct impact on property values.
For every additional dollar spent in state aid per pupil, it said, house values jump by about $20.
“A better education means a certain type of school,” says Tom O’Grady of Pro Teck Valuation Services, an appraisal management company. “But a certain type of school may end up meaning a pricier home.”