Posted by Leonard Steinberg on May 12, 2011
New banking laws prevent a buyer from having an appraisal ordered prior to a fully executed contract: I think this is just stupid. Here is what I propose and why:
With many Sellers reluctant to provide financing contingencies, and certainly appraisal contingencies, the ability to have an appraisal prior to signing a contract is critical. Right now if you have that appraisal, the bank will not use it and order another one. Would it not be smarter for all parties to know whether a property will or will not appraise BEFORE entering into a contract? Of course it makes all the sense in the world, yet the new banking laws just don’t like common sense. I propose the following: Banks should provide a list of ‘approved appraisers’, those they deem sufficiently qualified to do an accurate appraisal. Buyers would then have the option to pay for a ‘pre- appraisal’ (the banks don’t pay for the appraisal anyway….the cost is passed onto the buyer anyway) and once in contract and securing the financing, the bank could either use that appraisal, or as a minimum, charge a minor additional fee for a second appraiser visit or ‘quick appraisal audit’ prior to signing off on the ‘final appraisal’.
There is no doubt appraisal abuse in the New York real estate market madness of a few years ago required reigning in……appraisers had a gun to their heads to meet certain pricing…..but these days, banks in their never ending plight to raise profits are seeking out the cheapest, least educated appraisers, often delivering appraisals that are a pure disgrace. (I have caught an appraiser mis-measuring a room by 20 feet!). Appraisals are more of a science than an art: It’s pretty black and white stuff.
Waiting to be in contract…..then ordering an appraisal….then assessing the ‘results’ is quite simply STUPID. Change is essential. Now.