this all the time.
I recently sold and bought a house and the appraisals for each came back exactly at the sale price. This is pretty typical in the real estate world and it got me thinking about the appraisal process. Is it really necessary to get an appraisal? It seems like it’s just another expense, another person to pay and it’s not really protecting you, the buyer or seller.
The appraiser’s job is to give the bank (or lender) the green light on a purchase. The appraisal is supposed to be an impartial opinion about the value of the home to make sure the buyer isn’t overpaying and the seller isn’t underselling. But in reality, when an appraisal is requested for a purchase, the appraiser is usually given a target price. The appraiser will then pull comps, make adjustments, and find that the house is worth between a certain price range, and if the contract price is within that range, the appraisal will come back saying the house is worth the contract price. So the exact value doesn’t really matter, and it’s not necessarily protecting the buyer or seller, it’s just giving the bank the green light to go ahead with the purchase.
It’s a bit of a con job, if you ask me. The appraiser is looking at the contract price and verifying that it’s a reasonable number. Three appraisers could have three different opinions, but since you’ve given them a target, they’re more likely to hit it if the comps back it up. I’m an appraiser and I hear this kind of thing all the time.
Appraisals are an important part of the home buying and selling process, but they don’t always provide the protection buyers and sellers think they do. It’s ultimately up to the buyer and seller to make sure they’re getting a fair deal. The appraiser is there to give the bank a green light, and they’ll hit the target if the comps back it up. So, while it’s important to get an appraisal, it’s also important to remember that it’s not always protecting the buyers or sellers.