Is there such a thing as a lowball appraisal?I just had a borrower call me and tell me that the appraisal that I completed was not accurate. After all, the value was not 20% higher than the tax assessed value. Let me explain an interesting trend with the real estate market. When prices were going up 20% per year, my appraisal values were almost always higher than the assessed value by 10% to 30%. Always. If they were not close, I'd think something was wrong. This was during a time when market conditions were increasing at an extremely fast rate. Now the market is much, much softer and housing prices are either declining or trying to decline. Sometimes, my appraisal value will be higher than the assessed value, but many times my appraisal value will be lower than the assessed value. Why do you think this is the case? This is because when housing prices are increasing, the assessor may assess your property once per year. If home prices are increasing by 20%, they should be higher than the assessed value. When housing prices are declining, the assessed value will show the higher value until the assessor reassesses your home for tax purposes.
So you see, the market value and the assessed value will not be the same. They are two separate numbers. Most of the time, the assess value and the appraised value will be within 20% high or low and in some cases, it may be even more than this, but that is how the market works and this is how the assessed value works. The other day, a Realtor told me that the number one thing that is killing her deals right now is that the assessed value is too high and the owner (buyer) does not want to pay taxes on the property when they just purchased the home for much, much less than what the tax assessor has valued their property at. So as a general rule, assessed value or the county and city taxed value will usually chase the market value or the assessed value. This means if housing prices are increasing and home values are going up, the assessed value will be lower than the appraisal value. If sales are declining and market conditions are soft and homes prices are selling, the assessed value may be higher than the appraisal value. How to make lemonade out of lemonsIf you just got your appraisal back and you think that you've got a lowball appraisal, you can do two things. One, complain and call the appraiser and let them know that your assessed value is higher than your appraisal, or you can go through an appeal with your city or county to make sure they lower your taxes. Sure, I know that refinance deal will probably not work, but that's the way the cookie crumbles. And remember this.If you are the borrower trying to refinance and wrap all of your credit card debt into your home, it's called a lowball appraisal. If you are a divorced spouse and you get 1/2 of the proceeds from the appraised home, the appraisal will always be too low or too high, depending if you are giving or receiving. If you’re a home owner, selling your home, everything will be wrong with the appraisal, unless your deal goes through. If you are the buyer, there will be something wrong with the appraisal unless you can buy the home. If you are the lender, there will always be something wrong with your appraisal, as many market conditions are not perfect and you'll usually have questions about the value regardless of how the appraisal was developed. So when you think you’re getting a lowball appraisal, it's called fair market value in most cases...unless you can prove them wrong.. And what you think is a low ball appraisal is the correct value for the correct time. |