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Real Estate Appraisal Balancing Act


With mortgage standards finally beginning to relax a smidgeon, market players and investors are beginning to line up to take advantage of the now-favorable real estate market conditions. However, there is a new fly in the ointment – the real estate appraisal.

Does this scenario sound familiar? The price has been negotiated, the buyer has passed all the applicable credit checks with flying colors, everyone is all set to finalize the deal, and then things just fall apart because the appraised value on the home or investment property is short of the deal price. Since this means that the buyer has to cover the difference independently, even a small percentage shortfall in the assessed property value could cause the deal to fall through.

Industry pundits believe that banks and lending institutions are indirectly responsible for the persistantly low real estate appraisal values currently permeating the market. While lenders don’t ask for the appraisal to be low per-se, they do typically request that the appraisers cover all the bases which inevitably leads to a lower-than-expected appraised value.  Banks are being extra cautious in the wake of the recent crisis as they are unwilling to repossess homes which are valued at a level that is lower than their mortgage values.

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