One Of Five Appraisals Has Value Less Than Contract Price, Says Platinum Data

Posted by Patrick Barnard on October 21, 2014 No Comments
Categories : Residential Mortgage

More than 17% of appraisals on purchase transactions have a value less than the value of the contract price – possibly indicating that home values have plateaued and/or that appraisers are taking a more conservative approach when valuing properties, according to a report from Platinum Data Solutions.

The company based this information on data collected from FreeAppraisalReview.com, a cost-free automated appraisal quality technology designed specifically for residential real estate appraisers.

"When one in five appraisals is lower than the contract price, it's worth taking a deeper delve to find out what property values are doing," explains Phil Huff, Platinum Data's CEO. "For example, it could mean that buyers are paying more than a property is actually worth, possibly because the market is starting to stabilize. On the other hand, it could indicate that appraisers are being more conservative in valuing properties, which – given the regulations they're facing – would be understandable."

Returned appraisals are the most frequent grievance among lenders and appraisers because they drain efficiency and reduce profitability, according to Platinum Data. When lenders and appraisal management companies (AMCs) catch errors, they return the report to the appraiser for corrections or clarifications. The company explains that this can cause days-long delays – not to mention a reduction in profit margins for everyone involved: the appraiser, AMC and lender.

"Lenders and investors would be wise to keep their eyes on trends like this," said Huff. "If frequent lower appraised values are reflective of a stabilizing or declining market, that could present a major impediment to the quality of loans they're transacting, selling and buying."

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