FRISCO — North Texas home buyers and sellers are calling it a "deal-breaker". After agreeing on a price, their deal falls apart when the appraisal value comes in much lower than the sales price.
David Hecht found a buyer for his Frisco home. Their agreed price: $350,000. But the appraiser valued it $18,000 lower.
"I was shocked — completely shocked," Hecht said.
So he protested, and the property's value was raised to $340,000 — still $10,000 below the agreed sale price.
"We ran the risk of losing the buyer," Hecht said. "The buyer got real skeptical at that point,as to what was going on."
Realtors say it's happening again and again. Buyers are losing their dream homes. Sellers are forced to lower their prices.
"Homes are selling at better pricing,” said Frisco Realtor Jeff Cheney. “The market is trying to pick up steam and really trying to recover. But the appraisal market is essentially holding it back."
New federal regulations designed to stop fraud require lenders to use independent appraisers. As a result, Realtors say the appraisers may not be familiar with neighborhoods. They say in many cases, the appraisers are looking at foreclosures when analyzing comparable home prices.
"When foreclosures become predominantly what the neighborhood is — say, seven out of ten — then the appraiser should look at those, because that's what the real market is," said Dallas appraiser Steve Nichols.
Nichols says while sales are up, values are flat. "Lenders are counting on appraisers to base their information on historical data, which is — what were homes selling for yesterday, last month and the last six months?" Nichols explained.
The only recourse for David Hecht and other sellers like him is to protest the appraisal with the lender.