ORLANDO, Fla. – Dec. 14, 2012 – Florida’s real estate recovery is strengthening, though tight mortgage credit and issues with appraisals continue to impact potential home sales, according to a recent survey from the National Association of Realtors® (NAR).

“There are appraisal issues in the marketplace, but many of those problems are related to the use of AMCs (Appraisal Management Companies), a corresponding lack of appraisal geographic competency, and lenders asking appraisers to bid on assignments – where the lowest bid with the fastest turnaround time gets the work, even though it often results in sloppy work,” said Pat Reass, a state-certified residential real estate appraiser at Appraisal Group MidFlorida LLC in Winter Haven.

Reass outlined appraisal challenges and their effect on the state’s housing market recovery during Florida Realtors® 2013 Real Estate and Economic Forecast Conference in Orlando earlier this week.

Explaining “appraisal geographic competency,” she said, “What’s adding to the problem (with AMCs) is that most of (their) appraisers are coming into an area that they don’t know.” Plus, these non-local appraisers can’t access the MLS or don’t fully understand the local nuances of the MLS; they don’t know the local building codes or know zoning issues.

Another challenge, according to Reass, comes from clients who put conditions on what comparables (similar properties used for valuation purposes) an appraiser can use, negating the appraiser’s ability to do his or her job.

“Sometimes, we’re asked not to use short sales or REO (real estate-owned or bank-owned) properties – though those may be the only like sales in the area and need to be part of a true market opinion,” she said.

At every job she’s had over the past five years, Reass said she hears this question: Can distressed sales – short sales or sales of foreclosures – be considered as comparables? Her answer: “Yes, if it’s a like property and looks just like the one I’m currently appraising, is in the same conditions, has the same features and so on.

“The good news is that we’ve seen a lot of these foreclosed and distressed properties already purchased in Florida, so there are more non-distressed sales to use as comparables in the marketplace,” she added.

Finally, Reass said she wanted to address “the talk about appraisals slowing down or killing” deals. What may seem like an issue with an appraiser, from a Realtor’s perspective, actually may be a problem caused behind the scenes by a lender.

To illustrate her point, Reass told a story about an appraisal on a home in her market area that she completed for a buyer in early November, noting that all was in order for the sale to close. However, a month later, the transaction was still pending because the bank held on to the paperwork and was continuing to review the loan documents.

“From the outside looking in, that might look like it’s a problem with the appraisal,” she noted. “But in reality, it’s the bank’s tightened scrutiny that caused the delay. There’s a longer time between appraisals being delivered and loan approvals, and subsequent loan closings.”

At other times, the bank may request a second appraisal after the first one is completed and everything is in order for the sale to close, Reass added, which keeps the sale pending.

As noted by NAR, most appraisers are competent and provide good valuations that are compliant with their professional standards. According to the recent survey, 65 percent of Realtors who responded reported no contract problems relating to home appraisals over the past three months. However, 11 percent said a contract was cancelled because an appraised value came in below the price negotiated between the buyer and seller, 9 percent reported a contract was delayed, and 15 percent said a contract was renegotiated to a lower sales price as a result of a low valuation.

© 2012 Florida Realtors®