Why Are Appraisals So Difficult in the PDX Market?
What You Need to Know About the Appraisal Process in PDX
Who are appraisers, and what exactly do they do for their part of the home buying, selling, and mortgage refinancing processes? You probably already know that professional appraisers are key players in the real estate market. Appraisers perform a service by assessing property value, which in turn, aids prospective sellers in the process of determining acceptable property prices, or helps potential buyers deduce reasonable offering prices for properties.
A Real Estate Market History Refresher
On the eve of the 2008 mortgage crisis, local real estate markets experienced trends of softening home prices and sagging sales. With these industry changes, appraisers underwent pressure to inflate values. This situation turned dire when the market finally crashed, as appraisers felt a heightened pressure to compete for well-paying work.
In addition to a scarcity of profitable jobs for appraisers, the post-bubble economy ushered in a wave of heightened regulatory issues. As the Dodd-Frank Reform and the Consumer Protection Act were signed into federal law, the appraisal industry encountered more stringent certifying and licensing practice rules.
Together, a paucity of income-producing jobs and increased regulation led many appraisers to pursue work in other fields. Data from the United States Census Bureau reveals a strong decline in credentialed appraisers; over the past six years, the number of appraisers has slid from 118,657, to a mere 100,129 – a loss of more than 15%.
Getting Up to Speed
So what does this mean in the context of today’s real estate market, especially in a hot city like Portland? Realtors and mortgage companies in PDX warn both buyers and sellers that the current appraisal climate warrants concern. Daniel Blachowski, an Oregon licensed broker with local boutique agency Urban Nest Realty, shared that the “appraisal situation is very troublesome right now. We are seeing very long delays in ordering the appraisal and the actual completion date, even when the appraisal is escalated by the bank for a much higher fee.”
What’s more, the situation doesn’t look as if it will be corrected anytime soon. Why? Basic supply and demand. The standards for becoming an appraiser are very high, and it takes a lot of time and apprenticing. Consequently, it is anticipated that the number of appraisers working in the field is likely to stay low. But with low interest rates available in the market, appraisers are very busy working on refinance appraisals in addition to home purchases, showing a supply of work that supersedes the capacity of home appraisers.
Know Your Market
In recent years, the Portland real estate market has skyrocketed, creating a high demand for appraisers. As a result, if you’re buying, selling, or refinancing your home, here’s what you need to know.
First, to put it simply, expect delays. With fewer people available for appraisals (thinking back to the effects of the 2008 real estate crash), the process of closing a deal on a home can be delayed by a few weeks or even longer, for those requiring special FHA or VA loans.
With delays can come added stress. Realtor Daniel Blachowski explains that a smaller pool of appraisers can “cause stress for buyers and sellers by delaying closing and [creating] the possibility of a low appraisal. In a multiple-offer scenario, properties can bid up as high as $150,000 over list price.”
In effect, this means that buyers should be well aware of potentially higher costs. Blachowski continues, “It used to be that if an appraisal came in below the contract purchase price, it was another opportunity to negotiate on price. But with the exuberance of the current market, in order to get an offer accepted, buyers may waive their appraisal contingency and agree to bring more cash to the table.”
Portland Home Buyers and Mortgage Refinancers, Be Prepared
In light of potential delays, rising costs, and impending stress, try to focus on proactive strategies, and prepare in advance to deal with these market challenges.
Be realistic about how much you’re willing to pay for your home. If you know ahead of time that you might follow the strategy of waiving part of the appraisal contingency in order to win a bidding war, adjust your budget accordingly when you start your house hunt.
In a multiple-offer scenario, look for an offer that includes the appraisal contingency waiver in addition to other strong characteristics in the offer, such as a shorter inspection period or waived inspection contingency. While there is risk, with counsel and guidance, this can be a faster route to getting you the house of your dreams.
