Short Sales

With short sale transactions, the role of an appraiser is even more important. Banks don’t want to get shafted by selling properties for too low, but of course the properties must also appraise high enough so that the buyer can obtain financing. With short sales, before an official appraiser is done, a BPO (Broker Price Oppinion) is usually done. Appraisals are usually just required for the borrowers lender as part of the loan and financing conditions.

A BPO is similar but less complex than an appraisal. Rather than being performed by a certified appraiser, BPO’s are performed by independent real estate agents who have nothing to do with the short sale transaction. The purpose of BPO’s is to determine a market value that banks are willing to approve for the short sale amount. Broker Price Opinions are done before short sales will ever be approved.

What is a Good Appraiser?

The real estate appraiser’s definition of “a good appraiser”: The good appraiser has been well trained through education, experience and mentoring . If the appraised value is off, someone relying on his report might get burned. The appraiser has  reliable data sources and knows his area of service well. He has a good idea of the ebb and flow of buyers and sellers in the  subject properties marketing area , both from his  extensive data sources and from his experience with the  marketing area area. When including comparable sales report, he strives to provide the most recent comps which are most comparable to the subject property. Physical and locational differences are adjusted based on what the market indicates. The good appraiser also considers  listings and pending sales as (after market based adjustments) they  will tend to set the upper limits of value. The certified appraiser reconciles all of his research, analysis and reasoning into a final value estimate that is not  affected by biased people connected with the transaction. The product will be an unbiased home appraisal.

From over 23  years of appraising, the following is my understanding that  the definition of a good appraiser is, from the view point of view of:

Divorcing spouse A: A good appraiser is one who brings the value in LOW because I want to buy my EX out of the house.

Divorcing spouse B: A good appraiser is one who brings the value in HIGH because I want my EX to buy me out of the house.

A few Commissioned loan agents: A good appraiser is one who will, look at comps and tell me what the value will be before doing the appraisal; use whatever comparable sales will indicate a high value (even if they are not the most comparable); hide bad things about the property or location ( which might kill the deal  ); will change the report when the truth about the property  hinders the underwriter/lenders guidelines or requirements; will bring the value in for what ever will make the loan work. (Disclaimer: the majority of commissioned loan agents I work with are very professional and do not use the above tactics)

All Lenders (the one with the money): A good appraiser will be unbiased in his appraisal and communicate true market value.

It is kind of funny that the definition of “a good appraiser” can be so varied. In the face of being labeled “a bad appraiser” by those who use another definition, the good appraiser will always stick to his definition, no matter the cost.

Chas Leeper has been a real estate broker for over 31 years; a certified and designated real estate appraiser; an author, outdoors man and grandparent.  He is currently the Chief Appraiser of Southern California Real Estate and Appraisal Inc.  Newport Beach appraisal of bayfront and waterfront homes is his specialty.More information about Chas W. Leeper, SRAcan be found at : www.leeperappraisal.com/principalappraiser.htm or call 949-574-5534.