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When buying a home in Oakland or Lapeer County Michigan a standard contingency is financing (the buyer obtaining a mortgage for the house). Normally, part of the financing process is an appraisal, and the cost of the appraisal is born by the purchaser.

  • So is this the purchaser’s appraisal?
  • And is the appraisal for the protection of the purchaser?

The answers are no and no.

If it really was the buyer’s appraisal, the buyer would get a say in who the appraiser is. Or at least the buyer’s loan officer would get a say.

Loans mortgage appraisalsThe appraisal is for the protection of the lender. The lender loans money to a purchaser, and that money is secured by the house and, rightfully, the lender wants to make sure the value is there.

Because of some of the asinine changes in the mortgage process over the past couple years, the loan officer is no longer able to hire, or even speak to, the appraiser. The lender (loan officer) contacts an appraisal management company who then assigns an appraiser. And like in anything in life, there are good and bad appraisers.

So you the consumer can interview and choose the best real estate agent to work with. Interview and choose the best loan officer to work with, choose the best home inspector, best insurance agent, best title company … But no say on who appraises the home you are trying to buy.

Appraisers themselves are finding themselves under scrutiny because some want to blame them for the housing mess we are currently in. And the result has been overly cautious appraisers. And many inconsistencies in appraisals.

I had a sale earlier this summer where 2 appraisals were ordered from the same appraisal management company, for the same property within a few weeks of each other. The contract price for the house was $380,000 and it was one of multiple offers. So the free market pretty much set a price of $380,000. One appraisal came in with a value of $300,000. The other appraisal came in at a value of $362,000. Both were local appraisers.

I had another sale where I was on the listing end (a short sale) and it was another property with multiple appraisals. Between the buyer and the lien holders there was a total of 5 appraisals. 5 appraisers came in with 5 different values.

horse racing first and last equalOne of the main problems I’m seeing on the appraisals is the appraisers aren’t giving value for quality. Everything is size and location with very few adjustments, and those adjustments are for things like walk out basement vs standard basement. Maybe a few thousand for a finished basement vs an unfinished basement. If the comparable sales are in the same sub you may see an adjustment for location within the sub.

What I’m not seeing is when the house isn’t in a subdivision is credit for a more desirable neighborhood. In the first example above, that house was on a lake in Independence Township with Clarkston schools. Part of that lake is in Waterford with Waterford schools. Homes in the Clarkston school district have always garnered a higher price than Waterford schools- but not according to the appraiser.

I’m also not seeing credit given for quality. Top of the line Anderson or Pella windows will get zero value. Wood interior doors as opposed to the typical builder’s grade plastic feeling doors will get zero value. Upgraded cabinets, counters, light and plumbing fixtures will get ZERO value.

Now take 2 houses in the same or similar neighborhoods, and house a has builder grade everything and house b had the same floor plan built but upgraded everything mentioned above– should both those houses sell for the same price?

From a buyer perspective you may be thinking “Great! I can get $50K mattress money extra downpayment if house doesn't appraiseworth of upgrades for free.” Maybe not. You may find the perfect house and are willing and able to pay for quality. You spend $300+ on a home inspection. You spend $300+ on an appraisal, and the appraiser comes in $30K lower than the agreed upon price. The seller does not have to come down on price. If  the seller won’t come down, and if you still want the house, you would need to come up with the extra $30,000. If you don’t have it, you won’t get the house. You may have to settle for mediocrity in order to get a mortgage. Or in the case of the lake house above, maybe a lesser school district.

By the criteria many appraisers now feel they need to use, with the value determined solely by size and location, that is the same as saying the first place horse in the Kentucky Derby has the same value as the last place horse in the Kentucky Derby- all the same age, about the same height and all the same class of horse.

When I represent a buyer, I will perform a market analysis on the house you want to offer on. I will give you my opinion of value and back that opinion with comparable sales. I will also give my opinion on what I think the appraised value will be, and if there’s a difference, you will need to prepare yourself to possibly lose the house you want or pony up the difference. And if you are a person who feels that quality has value, be prepared to come up with additional down payment.

Please don’t hesitate to contact me about buyer representation if you are considering purchasing a home in North Oakland or Lapeer County.

Jackie Hawley
cell: (248)736-6407
Jackie@JackieHawley.com
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