Faulty home appraisals 'snowballing' - Phoenix Business Journal:

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Even as prices begin to stabilizde andbuyers re-enter the the appraisals many banks rely on to approve financin g are causing some deals to fall apart at the last or forcing sellers to agree to lower prices. National Associationb of Realtors chief economist Lawrence Yun said the appraisapl problemis serious. “Lenders are using appraisers who migh not be familiar witha neighborhood, or who compare traditionalk homes with distressed and discounted sales,” he said. “In the past stories of appraisal problem have been snowballing from acros the country with many contracts falling throughg at thelast moment.” D.C. real estate agent Jeffrety Tanck agrees.
Tanck, with the Czubs Group at McEnearney Associates, said bad appraisals have affectecd two of his deals in the lastthree “In one case, a $364,000 condo came in $80,000 less than asking. That buye was using an out of town lender who had no conceprt ofthis market,” Tanck said. “Another appraisap on a $317,000 coop came in $27,000 forcing the buyer and selle tomeet halfway.” The potential problem inaccurater valuations pose to salexs can be seen in numbers that measure pending sales of existing homes. Those represenf contracts thatare signed, but sales that haven’ closed, and are usuallgy considered a more forward-looking gauge of housiny sales.
Earlier this the Realtors group reported pending home salees in April were up for the thirdstraight month, advancingv 6.7 percent from March, with pending sale s up more than 3 percent from a year ago. By contrast, closedd sales of existing homes in May wereup 2.4 percengt and remained nearly 4 percent beloaw year ago levels. The NAR’s Yun said sees a danger of a delayexd housing market recovery and a further rise inforeclosures “if appraisal problems are not quickly corrected.” Tanck said part of the problek is too much work and too few appraisers, which he said are in demanfd right now.
“People are buying, and lenders and appraiserz areboth busy,” he “But lenders should make sure they’re usingt appraisers with the correct markett knowledge.” Still, many indicators continue to poinr to stabilization in housing. The May increase in existing home salesa was thefirst back-to-back increase since Septembefr 2005. A separate report Tuesday from the Federal Housing Finance Agenc y showed declines inprices moderating, with the average U.S. home prics down just 0.1 percent from Marchy to April.