I've written a few blog posts about real estate appraisals in the past - most recently this one about the inherent biases in the appraisal process that make them kinda worthless. That one also contains a link to an earlier one on some of our worst experiences with real estate appraisals.
Well, with the Coronavirus pandemic in full swing the quality of real estate appraisals has sunk to new lows. It's to the point now where I wonder why they even bother with them since most are now just drive by. That's right. The appraiser just drives by the property and comes up with a number - I guess based upon interior photos and the exterior. I totally understand why they've gone to this extreme but I just don't know how they can do their job under these circumstances.
Here is an example of a situation we found ourselves in on a home we had for sale in Buffalo Grove a while back. It was nicely updated with 4 bedrooms, 3 full baths and a finished basement. We had 5 offers above $385,000 and the winning bid was for $387,000. Clearly this home was worth at least $385,000.
Unfortunately, Wells Fargo was the lender and they ordered a drive by appraisal. One of the primary comparable properties was across the street but it was not updated, did not have a finished basement, and only had 2 1/2 baths. Oh...and it also needed a new roof which knocked the price down by about $12 - 13 K, resulting in a net price of $356,000. The appraiser added back $20,000 for the fact that our home had a finished basement. Try finishing a basement for $20,000. Then, instead of adding to the estimate for the fact that we had a third full bath instead of that half bath the appraiser actually deducted $6,000 because they thought we only had 2 full baths. I guess they didn't look at the real estate listing. So the appraisal came in at $370,000.
When an appraisal is so obviously flawed you can appeal it and you should win. Although we tried that our request was denied - even though the appraisal had glaring errors and omissions. WTF! So this is the world we live in now. Admittedly, it's not always this bad but this is an example of how bad it can get.
#HomeBuying #Appraisals #RealEstateAppraisals
Gary Lucido is the President of Lucid Realty, the Chicago area's full service real estate brokerage that offers home buyer rebates and discount commissions. If you want to keep up to date on the Chicago real estate market or get an insider's view of the seamy underbelly of the real estate industry you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.