Appraisals have become one of the biggest obstacles to buying real estate. While appraisers were, in previous markets, under pressure to inflate values, the pendulum has now swung to the other extreme. For example, Prestige Real Estate recently sold a condominium for $390,000. The exact same style of unit, in the same complex, sold for $470,000 less than a year ago and there have been no other sales since. Despite this perfect “comparable” sale, the new appraisal came in at only $400,000! If the buyer was not prepared to pay 30% down at closing, we doubt that financing would have been available due to that appraisal.
Unfortunately appraisers receive a copy of the Purchase and Sale Agreement prior to conducting their appraisal and they are greatly influenced by the sale price listed on the contract. Appraisers are also noting the small volume of sales to justify their conservative opinion of values. To make matters even worse, lenders are now hiring appraisers who have never been to Killington (some from out of State) to perform these appraisals. A good appraisal is in many cases now left to the luck of the draw!
Freddie Mac and Fannie Mae have come out with a new “Market Conditions Addendum to the Appraisal Report” (April 1, 2009). Once an appraisal is complete, it may need to be examined by “appraisal reviewers” who have the authority to call for a complete review of all condo documents and by-laws. Such a review leaves decision making powers to bureaucrats sitting in offices in other parts of the country who have no practical or real experience with Killington real estate market.
Our National Association of Realtors is lobbying Fannie Mae and Freddie Mac to relax many of these new rules. This will take time and we do not see resolution of this in the near future. So even when buyers start to feel more comfortable about buying in Killington and we begin to write contracts, we are a long way from closing on a deal if the purchase is subject to financing.