Buyers purchasing Indianapolis homes for sale will need to have an appraisal done on their home in order to determine its value against a loan. The appraisal industry has been under pressure particularly after the crisis in the United States mortgage industry. Experts are now evaluating home appraisals, the appraisers who conduct them and considering home appraisal changes to see where the problems lie.
The issues around home appraisal changes is not unique to the Indianapolis real estate market. Appraisers around Indiana, as well as the rest of the country, are feeling pressured to expand their territories to appraise because of lowering fees. Appraisers having large areas in which they perform their business makes people question whether or not they can have accurate knowledge of such a wide base of homes. This not only affects the Indianapolis buyers who might not get an accurate value placed on their future home but it affects the sellers as well.
Stories about sellers feeling they have had an inaccurate valuation placed on their home are told across the country. Appraising isn’t an exact science, of course. Looking at and evaluating comparable homes can factor in the expertise and professionalism of each individual appraiser. There are certain homes that may or may not be considered within each summation. However, there should be some general concensus overall. Buyers and sellers are finding that this isn’t always the case.
Some automated appraisals appear to be conducted by companies as well. Homeowners have been known to be given home equity lines that far outweigh the values of their homes due to a computer pulling comparable properties rather than an individual evaluator. These issues and more are causing people to look toward home appraisal changes and the process by which they are created.
The goal behind an appraisal is to protect homeowners and buyers from being inaccurate in estimating the value of a home. When appraisals are overestimated, a buyer may pay too much for a home and then foreclosure becomes a more likely outcome, which is a trend across the nation. When appraisals are underestimated, sellers are less likely to sell their homes or be able to refinance. The opinion of some Indianapolis REALTORS® is that we may have become too conservative in estimating the value of homes, perhaps because appraisers have become overly cautious due to our mortgage crisis.
Because mortgage brokers and real estate agents are working to close deals, they are particularly concerned about the inaccuracy of an appraisal that will halt a deal. Pressure from all sides has encouraged Freddie Mac and Fannie Mae to have appraisers adopt a different code of conduct. These two companies back most mortgages funded in our country so this new code, started May 1, is now the standard behind most loans in the United States.
One area this code addresses is who chooses the appraiser. The code does not allow mortgage brokers, loan officers or real estate agents to select the appraiser. The subsequent outsourcing of appraisals is hitting hard those conducting these evaluations. Because appraisal requests are now being handled by appraisal management companies, appraisers are seeing a large chunk cut from their fee for this third party service. Where appraisers used to pull in as much as $400 per appraisal, they are now seeing more on the order of $200 per report.
Obviously, the stress to our real estate industry is being observed all-around. The effect on our appraisers is just one area feeling the pressure.