The major log jam in today’s real estate market is valuation difficulties. Banks are having a hard time confirming the purchase amount meeting up with the actual value of any given home. This causes a bottle neck in the amount of money they can loan out due to processing times being extended. Just to make sure what they are loaning on is worth the amount they are loaning, banks hire appraisers.
In the appraisal the analysis of market data is used to compare properties with similar attributes to establish a price window. This is done so banks do not loan too much money on a property that they cannot get their initial loan amount back if they have to foreclose on it. Otherwise, if the property owner could not or would not pay the bank would be left holding the bag, as in a rapidly depreciating market.
An appraiser can not just be someone off of the street. An appraiser is a formerly trained person who knows the trends and values of the local real estate market. The objective valuation an appraiser is supposed to provide cannot be influenced by buyer nor seller or the entire appraisal may be corrupted and unreliable.
Without that, the entire process has a shadow of doubt cast over it and may be deemed useless, or a real liability in a court of law.
The frightening side of an appraisal is when there is a willing and able buyer, but the appraiser says the property is not worth the asking price. At that point there is really only one thing that can happen to salvage the purchase and that is for the seller to reduce the asking price.
A very rare solution is for the buyer to cough up the difference, but they really have to like the property to do that, typically.
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