Some of the most beaten down real estate markets are finally experiencing that long-awaited bounce back from the crash. Cash offers are yielding more sales. Pent-up demand is driving prices higher. But something’s missing.
Brokers in the faster markets, such as Nevada, California and Florida—where the soaring prices almost defied gravity leading up to the crash five years ago—are finding it hard to move all these homes, even though there are plenty of willing buyers. While the homes are available, the mortgages are not. More specifically, they say, the appraisals are not.
While a would-be buyer could be more than qualified to pay back a $1 million loan for an Arizona McMansion, in many cases, the banks can’t sell them that mortgage—even if the loan officer wants to—because the appraiser won’t sign off on that $1 million valuation.
“It happens a lot in an escalating market,” says Gino Blefari, president and CEO of a brokerage in the red-hot San Francisco Bay area. “You have to go back to the appraiser and say, ‘look, there were 27 offers on the property. Now that we’re having more sales, we’re better.’”
It’s becoming a heated issue across the country as low appraisals continue to squash real estate deals that already have the blessing of would-be buyers, sellers and banks.
At the heart of all the tension are the comparable properties, or “comps,” that appraisers use to base their valuation. The system is designed to keep everything fair and square for the buyer and seller while limiting the banks’ risk. However, conservative appraisals based on the most recent sales—deals made prior to the bounce—can inadvertently stall an otherwise healthy recovery.