You Can’t Trust All Sacramento Appraisals

Sacramento Appraisal-300x212It’s not astonishing that people do not understand how a Sacramento appraiser appraises a home, and why not all appraisals are a guarantee of value. Unless you’re a person who is really wedded to this business, like, say, this Sacramento real estate agent. But most individuals don’t sell or buy enough homes in their lifetime to care much about the details. They also might think a bank appraisal is like receiving a certificate of gold, as though it’s redeemable somehow or an item of value to treasure.

I see the look in the eyes of my sellers when I explain that a home needs to appraise at the price a buyer is willing to pay in order to actually close escrow. The eyes glaze a bit and they hear: real estate agent talking — a phrase my husband likes to use to illustrate how carefully I listen to him as in husband talking, yada yada.

For example, if you’ve got two offers for a home, and one offer is cash at $400,000, and another offer involves minimum-down FHA financing at $400,000, a seller might elect to take the cash offer. Because there is no appraisal. Of course, the downside to that is the cash offer buyers typically possess little emotional investment, and once they snag their fish, they often try to haggle over other small things to even out stuff.

Now, some buyers might agree to bridge the difference if an appraisal comes in low. They might say they will pay, say, $10,000 in cash, meaning if the appraisal was $390,000, they would pay out of pocket the difference for the low appraisal. Some do, but not very many. That’s because people still believe the appraiser’s word is like the 10 Commandments. Others also might promise they’ll bridge the difference but then cancel under an inspection contingency, rendering that promise worthless.

An appraisal is just an opinion of value. It’s an educated and calculated guess. Ask 3 appraisers, and you’ll probably get 3 different answers. They might be close in value, but still not match.

Sometimes, the swing in value between two appraisals is tremendous. Had one of those recently in which the home initially appraised for 10% more than it sold for, which was pretty ridiculous in a seller’s market for long days on market, and the second appraisal was 2% less than it sold for, still ridiculous. An appraiser almost has to be trying to mess up the deal to do that.

I recall an appraiser a few years ago who appraised a home for .0001 less than the sales price. Just enough to make the buyer pay for a new appraisal. Who does things like that? Most appraisers in today’s market want to appraise at the sales price because they recognize that prices are increasing. They don’t want to be that cog in the wheel dragging down the market, and they want to fairly assess homes.

But until you get past that appraisal stage, you don’t really have a sale. So don’t be spending that check yet. It’s common in today’s real estate market, especially for an FHA transaction, for a lender to order a second appraisal. It says if a bank doesn’t trust its appraisal, why should you?

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