Hot Housing Market Challenging For Lenders And Appraisers
Escalating mortgage applications and decreasing interest rates have put added pressure on appraisers as well as appraisal turn times. Lenders are reporting turnaround times for appraisals are increasing and as a result, lengthening the underwriting process.
With homes being bought and sold at such a rapid pace, the industry is experiencing a limited number of appraisers in addition to the underwriters trying to keep up with the demand. With continuing record low mortgage rates, a greater need for more underwriters and more appraisers has developed.
According to The Appraisal Institute (AI), for the past eight years, the number of active real estate appraisers has declined each year. The problem is not simply that too many appraisers are retiring, but that very few appraisers are coming into the profession.
According to the National Association of Realtors (NAR), as of June 2020, “appraisal issues” were the cause of 18 percent of real estate contract delays, second only to issues related to obtaining financing 37, percent. Furthermore, appraisal issues were the cause of 9 percent of contract terminations.
Residential appraisals are basically a safety net for the mortgage company to ensure that the property they are lending on is actually worth the amount of the loan. Appraisers come out to the property and inspect its condition, size, location, and other factors and then look into comparable properties that have recently sold in the vicinity to try and determine the true market rate of the property.
From a Realtor’s perspective, if a buyer is willing to pay $200,000 for a property and the seller is willing to sell it for $200,000, that meets the test of willing buyer and willing seller and therefore market value.
However, the lender’s definition of market value is far more complex. Their definition requires “statistical probability,” or “the value to the many, not value to the one.” In other words, if 100 potential buyers were considering the subject property, what is the most probable price the majority would pay?
In March, the FHFA eased its standards for property appraisals to help keep families and employees safe throughout the pandemic. Due to safety precautions, many appraisers aren’t conducting in-home inspections and have taken advantage of the benefits that technology provides.
To help, homeowners can provide a complete set of photographs, along with any information regarding recent repairs and replacements – including items, dates and costs. Also, try to be accommodating to allow the appraisal to take place and avoid even further delays.
For now, experts suggest that everyone involved in the transaction exercise a little patience. Low rates are not likely to disappear, but appraisers and lenders will need to continue managing the overflow they’re currently experiencing for the immediate future.
If you have questions or concerns about buying or selling during this unprecedented era of real estate conditions, it’s best to consult with a local, experienced real estate professional.
Connecting with a knowledgeable Realtor with the right expertise, resources, and connections to help you navigate this experience proficiently and prudently can make a considerable difference.
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