Why do Real Estate Appraisers need to know the sales price of the home being appraised?

Question

I am buying a home in California and was disappointed to learn that my appraisal for my lender came in exactly at the negotiated sales price of the home. I later learned that he appraiser was provided the sales price of the home. I refuse to believe that it is merely a coincidence that the appraisal is exactly the same as the sales price. I believe this a huge bias for an appraiser that prevents them from being objective and deriving a truly independent valuation. I also suspect that they "did the math backwords" in getting to their appraisal amount.

When I questioned the appraiser she was emphatic that having the sales price is essential and in fact in California, as of 1 Jan 07, all appraisers are required to review the sales contract.

Any suggestions? Is there a way to get a good appraisal done w/out the bias of having the sales price known?
At first I thought the appraiser was stating the home was worth at least the appraised amount-but was told she came to exact amt.

Answer 1

According to USPAP (Unifrom Standards of Professional Appraisal Practices) the standard to which all licensed/certified appraisers are required to abide states that for a purchase transaction the appraiser is required to evaluate the terms of the transaction - this involves reviewing the sales contract.

This standard has long been in place so I have no idea where your appraiser came up with the 1 Jan 07 date, sounds like she is mixed up with something else.

In cases of refinances I believe an appraiser should not be provided with the 'owners opinion of value' because you are correct that there are some appraiser that are just number chasers to make sure they keep getting business from the loan officer/brooker.

With a purchase you also need to remember that your purchase price is now affecting the market. If other sales in the neighborhood are in close range to your purchase price this may cause the appraiser to value your home closer to the purchase price.

If you want an honest opinion of value you need to find a reputable appraiser and have them appraise your home without providing them with an estimated value. You could also hire an appraiser to do a 'field review' on the appraisal already completed this is usually a little cheaper. A 'field review' would be the equivilant of antother appraiser grading the quality of the original appraisers work, and let you know if the agree with the original value.

Answer 2

Why would they do that? It's in the agents' best interests to get the highest price possible for the house. Their commission is based on the sales price. Why would the appraiser undervalue a house? They get the same amount of money whether they say the probable sales price is $175k or $250k. It makes no difference to the appraiser. Maybe the guy down the street has something you don't, or the house looks prettier or there's updated kitchen or bath, or they have a finished basement. The house around the corner from mine looks like mine from the outside, but is very different on the inside because of what each owner has done over the years.

Answer 3

Alot of the time the bank doesn't want you to know how much equity you will have in a home prior to purchasing it, plus they are trying to prevent a problem from occurring. The only way to get an appraisal w/out worrying about the sale price is to have one done seperate from the sale itself. Just tell the appraiser you would like to know what it is worth for your own information, but it will cost you, around here its about $300 - $500.

Answer 4

So they don't look like idiots when they give you the appraisal. they also look up houses in your area that have recently sold so they can figure your price. Seems like anyone can be an appraiser