Over the weekend The Miami Herald ran an article regarding appraisals that I’ve been meaning to post about for weeks. The article discussed the latest speedbump the real estate market is experiencing from understated appraisals. Although the article was national in scope, it completely mirrored the appraisal issues we are experiencing in Coral Gables and Coconut Grove. Locally, property values are rising and recent closed sales figures clearly provide the data appraisers need to derive accurate value estimates…but the majority of appraisers are still minimizing the value of countless properties.
Frank Gregoire, former chairman of the Florida Real Estate Appraisal Board and an appraiser in St. Petersburg, is quoted in the article as saying “…many appraisers are reluctant to make the upward adjustments they know to be justified by recent positive appreciation trends because they fear criticism that they are potentially overvaluing the property — exposing lender clients to costly “buy-back” demands by Fannie Mae or Freddie Mac, or future litigation.”
In my neck of the woods, we often deal with appraisers who are not local and can’t distinguish the nuances of a given pocket in Coral Gables or the merits of particular tree-lined street in Coconut Grove. This was the case on a recent contract I had on a charming home in North Coral Gables. A Broward county property appraiser was assigned to this home and valued the property drastically below the offer amount. As the deal was quickly becoming unhinged, the buyers engaged another bank and I required a local appraiser be assigned.
What a difference. The local appraiser openly reviewed my prepared comparables and knew the coveted location’s extreme value. His appraisal came in $200,000 above the other company’s.
I agree with checks and balances. No one wants another real estate bubble but appraisers should rely on recent market trends and actual closed sales figures to derive value.