Appraisals and appraisers....

The Lazy Investor

Appraisers are funny people.

We can't live without them, but who can understand them?

Property values are based on comparable sales, right?
Comparable sales (comps) come from the MLS, right?

Well, then, just why is it that we need appraisers?

We need them because they bring us a 'neutral third party' - someone that is not involved in the transaction. Since the MLS is a Realtor(r) thing, it is possible that if we relied solely on the agent, they might want to 'skew' the results to a slightly higher mark - resulting in their higher commission.

If the seller would have a representative looking into the MLS for the comps, they, too, would most likely take the highest prices - to get the highest price.

Just as likely is the fact that, if the buyer's side of the transaction would be the one to give the final evaluation, the price would be on the lowest sales in the area.

Appraisers are there to give us a 'non-biased' opinion - something based on facts and figures only, and are suppossed to be totally neutral.

What seems to be the practice of 'neutrality', though, often gets swayed back to the side of 'who paid for the appraisal'... If the seller paid for it, the appraiser is inclined to work hard to 'bring in' the property value where the seller wants it. If the buyer pays for it, the same thing is true - bring it in no higher than the offer is made.

I guess there is really no '100% fair' way to get an appraisal. After all, we are all human. Even if it were a state-run thing, where some state agency would send the appraiser out to do the job, there would still be some influence from the person that let them in the house. Maybe we should let the state agency open the place for us, too? Heck, why don't we just have the state take care of everything for us - including sending us food, money and clothing? Maybe they would even send someone out to wipe our noses for us too?

I think I'd rather take my chances with an Appraiser!

Happy Investing!