The Myth Behind Bank Appraisals In The Financing Of Residential Real Estate
The myth behind bank appraisals… During my career I have heard countless customers say, “Bank appraisals are always low or conservative.” I think it is worth noting what the bank is asking the appraiser to do. Very simply, the appraiser’s job is to provide an independent opinion of the current market value of the property.
They are required to compare the home to other homes of similar size, design and construction in the same general area that have sold in the last 12 months.
We do provide the appraiser a copy of the sales contract for a home purchase but interestingly enough we are not allowed to provide the appraiser the owner’s estimate of value on a refinance. Also, the appraiser’s job is not to justify the price paid for a home or the amount needed to complete a transaction. It is to determine the collateral for our loan and more importantly protects the bank in case the client defaults on the loan.
The appraisal report is an art not a science and is just one person’s opinion of a property’s current value. In theory, if 10 appraisers are hired to appraise your home we could receive 10 different values. So are bank appraisals conservative? Maybe–in this market place where property values continue to decline being conservative seems like a prudent move to protect the assets of the bank. From a homeowners perspective, it can be very problematic long term in obtaining financing with an inflated or aggressive appraisal.
In May of this year a Home Valuation Code of Conduct will go into effect to further insure the independence and accuracy of the appraisal process and provide additional protection to home owners, banks and mortgage investors.
Tony Pigatti
Vice President Residential Lending
Archer Bank
Office #708-237-4049
Cell #630-254-8946
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April 11th, 2009 at 1:10 am
Very well written. This is the kind of information that is useful to those want to increase their SERP’s. Keep up the good work.
June 17th, 2009 at 7:04 pm
Hello: Could you please answer a couple of questions that I am not able to find the answers to. I am the seller. Can the buyer pay the difference, in their down payment, between the selling price and the appraisal? Does the appraiser have to use more than 2 sold homes as comps? Are unsold homes considered in the equation? And, how far, in distance, is the appraiser allowed to look for sold homes?
Thank you for your reply, as my realestate agent is unable to answer these questions and being the seller I can’t speak to the bank. Thank you again.
July 31st, 2009 at 2:49 pm
Some more tips would be great as real estate loans do change often. Plus more experiences are appreciated.
November 5th, 2009 at 3:51 pm
Where did you get this theme from? It’s pretty clean and nice