Is Your San Diego Home Appraisal Really Accurate?

Working mostly as a listing broker, I always receive calls from appraisers who want to confirm the reported MLS sales price, ask about the condition of the property and if the seller gave any buyer concessions.  By concessions, I’m referring to payment of buyers closing/loan costs or adding some improvement to the property prior to the close of escrow. Obviously, the appraisers were doing their due diligence to insure that their appraisals reflect the true resale value.

About two years ago, the frequency of these appraisal calls decreased and for the last 18 months or so, I personally have received perhaps just one such call for my last six sales. I’ve confirmed the phenomena of these vanishing appraisal calls with other local brokers. I also called a few appraisers, but just one would talk about this and only after assurance of anonymity. This appraiser originally said with the new State licensing law there were many more new appraisers and questioned their competency. When pressed, he very reluctantly conceded that my assumption that the real pressure to bring in the appraisals at the contracted purchase price (all resale appraisers have a copy of the purchase contract prior to inspecting the property) was causing them not to question the listing broker on condition or especially, seller concessions.

It’s my opinion, in our current San Diego real estate market, that it is very rare for a buyer not to get concessions from the seller. I’m not talking small change here; these real life recent sales show:

La Mesa $362,000 sale         -   $4,500 credit to buyers

San Carlos $480,000 sale      - $14,400 credit to buyers

Mission Valley $360,000 sale – $10,000 credit to buyer

San Carlos $385,000 sale      - $10,000 credit to buyers

So, are the buyers who are now paying approx. $375 for a residential appraisal really getting an accurate reflection of their potential new properties value? If an appraiser looks at the $480,000 sale above, as a comparable without inquiring about the concessions ($14,400 in this real example) the appraisal will be too high. If the appraiser does inquire about the concessions, they have to consider the comparable property was worth not $480,000 but $465,600!

Without payment of the concession, it is unlikely this property would have sold. If the true facts did cause the new appraisal to come in below the contracted purchase price, the buyer (paying for an accurate appraisal) would be not be obligated to go forward with the sale.  In today’s strong San Diego’s buyer’s market, the buyer would be in a very strong position to have the seller reduce the sales price to the accurate appraised value and thereby potentially save thousands!

I’m not a licensed California appraiser, just a California licensed real estate broker with three decades of residential experience, Many may not agree with the fact that these concessions reduce the real resale value of properties.  I can understand their opinion.  But, I think they are dead wrong! No seller I know, is willing to give away thousands of dollars of their equity if they could avoid it. This is a classic example on the part of pressured appraisers, of hear no evil, see no evil!

The easy correction to this problem would be a State requirement that appraisers of residential properties use due diligence to verify the full details of all comparable sales used in an appraisal. Until this happens, I would advise buyers to tell their mortgage lenders that they want a copy of the appraisal and will be looking for some notation on the document showing that the appraiser made inquiry into both the condition and possible concessions on each comparable used.[tags]San Diego home appraisals,San Diego real estate market, home appraisals, San Diego housing, San Diego home sales[/tags]  San Diego home sales