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Thank You Elizabeth Razzi! In Sunday’s Washington Post Real Estate section, in her weekly column Local Address, Razzi correctly sums up the current pressures and complications that consumers, appraisers and lenders find themselves in with many areas of the local market declining in value. Lenders and underwriters need to protect their investment and they depend on appraisers to give them a reliable estimate of value. Sounds simple but in today’s market it has become difficult.

Razzi points out that appraisals now include much more then just 3 comps and a value in a report. Lenders are interested in as much information about that local market as they can get. Besides closed sales we now in factor in properties under contract, active listings, DOM (days on market) and seller or builder incentives to help us make the best value estimate we can. Review of market statistics for trends is important. Foreclosures in an area can also impact values. Today’s appraisal reflects the analysis of much more information then many people realize. AVM’s become even less reliable in these changing markets and a full appraisal is the best way to go.

Low value is the most common complaint today. We all want deals to work but the appraisal must have current data to be reliable. In the current changing market, valuations become more difficult. Good appraisers work hard to explore all the available information and use their best judgment to estimate value.

Two other points that Razzi covers are important. She mentions the proposed new appraisal standards by Fannie and Freddie and I like her summary: “The proposed standards simply call for fair play. It’s not fair for lenders to withhold payment for appraisals they don’t like. It’s not fair to kick an appraiser out of the game if he doesn’t play along.” Enough said.

Her second point is that “Appraisers should be free from pressure to hit a preordained target”. Consumers typically overestimate the value of their home and in a re-fi they expect more then is sometimes realistic. Lenders have become much more cautious in working with re-fi customers to avoid some of these pitfalls.

Appraisers don’t want to “kill” deals, but are ethically obligated to be objective, independent and impartial. Current appraisers must walk a fine line in today’s market.

To read her whole article here’s the link: http://www.washingtonpost.com/wp-dyn/content/article/2008/03/07/AR2008030703907.html