Sacramento Real Estate Blog

Having just met a friend who went through the maddening scenario of an appraisal coming in too low, the feeling is still fresh in my mind. But on the heels of consumers complaining of artificially increased appraisals of homes now comes the opposite – house valuations are coming in too low. The typical scenario goes like this: a home is in escrow, agreements signed and then during the transaction, an appraisal is conducted and it comes back about $50,000 lower than the agreed-upon price. Now, keep in mind that the asking price is usually not arbitrary. Gone are the days when home sellers inflated their home because “it simply must be $10,000 higher than their neighbor’s house!” Today, asking prices are decided by bank-owned homes selling as comparables in the same neighborhood. So when an appraisal comes in that low, everyone is distraught. Sometimes the transaction falls apart.

However, this industry practice may soon change. In guidelines issued on June 30, 2010 Fannie Mae said lenders must contact appraisers to resolve discrepancies between the valuations, rather than simply reducing the appraisal. If it is not possible to contact the appraiser, the lender should order a second appraisal. Borrowers and/or sellers who believe a home valuation is too low may appeal the valuation or request a second option. It’s important to note that the second valuation must be more than five percent higher than the first—anything less is considered an acceptable difference.

Also, effective Sept. 1, Fannie Mae is prohibiting the purchase of loans from lenders who change appraisers’ numbers.