Many people like pushing the limits and breaking new ground. Not real estate appraisers.
A cautious, methodical breed, many appraisers have found themselves in the uncomfortable and risky position of sizing up Southern California homes whose sales prices have ballooned way beyond any recent comparable sale. Pity the poor appraiser then who must prove to a skeptical lender that a house is worth its $225,000 price tag when the most recent and highest comparable sale, or "comp," was only $200,000.
"The first guy to break the [price] barrier is going to have a problem," said Kenneth J. Kaiser, who owns a Duarte-based appraisal company.
Appraisals are commissioned and used by mortgage lenders to make sure a house doesn't sell for more than it's worth. A home sale could fall apart if an appraiser determines that the market value of a property is lower than what the buyer is willing to pay.
The risks of overly ambitious appraisals came to light in the 1970s and '80s, when real estate busts revealed inflated property values and shoddy methods. Fraudulent and inflated appraisals contributed to the failure of several thrifts during the late 1980s, leading to greater government scrutiny and regulation. California, for example, required appraisers to be tested and licensed beginning in the early 1990s.
Getting a fix on current values is never easy. But it is particularly difficult when the real estate market starts to change, as it recently has in Southern California, where many neighborhoods have seen prices rise sharply after years of stagnation and decline. It's a time when appraisers often find themselves pitted against real estate agents and homeowners, who are eager to cash in on higher values.
A recent deal nearly collapsed for Fred Sands real estate agent Stephanie Vitacco after the appraisal of a San Fernando Valley condominium she sold for $91,000 came in at the mid-$80,000 range. After Vitacco argued that prices were finally moving up, the appraiser raised his market value by several thousand dollars and the seller cut his price by about $1,000, she said.
"I have to do a really good presentation to show [the appraisers] where the market is going," Vitacco said. "If you rely on the last comp, [prices] will never go up."
