Lowell Deeds

The latest on real estate recordings and new technology from the Middlesex North Registry of Deeds in Lowell

June 12, 2009

A new era for appraisals?

by @ 10:26 am. Filed under Real Estate

A recent story in the Globe detailed the negative influence that appraisals are having on the real estate market. Many sales and refinancings have been scuttled when the appraisal comes back and values the property at less than the agreed sales price or the amount needed to pay off the existing mortgage. This is not necessarily a bad thing, and if it had happened more often during the irrational run up to the peak of the real estate bubble, perhaps the severity of the present economic crisis would have been averted or lessened. Nevertheless, judging the value of real estate is an art not a science, so when an property with a P&S for $225,000 has an appraisal come back at $220,000 and thereby blow up the deal, it would be understandably frustrating for all involved. A number of factors are contributing to make the business of appraising properties tougher than ever: The slow market yields few comparable sales; Many comparable sales are of properties owned by lenders who gained title through foreclosure and who heavily discount the resale price and thereby artificially drive down values of like properties. And appraisers are naturally wary of setting a current value which, in a steadily declining market, might seem overpriced in just a few months. While this new diligence in valuing property will be beneficial in the long run (assuming the cautionary impulse continues with the return of rising prices), in the short term, it certainly is contributing to the persistent slowness of the real estate market.

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