More Accurate Appraisals of a Trend

When it comes to setting a price for selling a home that’s correct for the current market, many aspects are taken into account. One that is seeing a great amount of emphasis right now are “comps”: the comparable sales of other properties in your areas.  Used as standards in home real estate appraisals, buyers and sellers haven’t needed to be concerned about “comps” as long as real estate values were on the upswing.

In this slumping market, mortgage lenders have recently been placing a great deal of importance on these benchmarks. Because of the swift decline in home prices, instead of accepting comparable property sales statistics from homes that closed six to 12 months ago, lenders and mortgage investors now insist that appraisers include the most recent comparable home sales. They now prefer that the stats from closings occurring during the last 90 days to support their evaluations.

Lenders and investors are also pressing for more all-inclusive data on local listings, pending sales and listing-price to selling-price ratios before agreeing to fund a mortgage for any amount.  As a result, more and more home sales are being complex or delayed as buyers demand that sellers reduce their prices to mirror the lower loan amounts their lenders are willing to give.  Prices are even being renegotiated after names have already been signed to contracts.  In some ways it can help the buyer because they get to pay a lower price, but if the sellers don’t like the new terms talks of a sale can end abruptly. When lenders and sellers won’t compromise, sure sales have fallen through.

Some supporters say the standards are producing appraisals that are much more sensitive to short-term changes in local price shifts.  Challengers of the new practice say that the requirements have contributed to evaluations lower than the price on the contract, putting sales in jeopardy. In addition, if sales are sluggish in some places, there may not be enough comparable closings within 90 days for a good measure.