Jim Goodrich has spent the past 25 years as a real estate appraiser, and his equipment is more sophisticated than ever: a smart laser that measures a home’s dimensions using Pythagorean functions for angles; a computer program that quickly drafts a floor plan and calculates square footage.
But even so, appraising a home’s value remains somewhere between science and art. And as prices escalate rapidly across North Texas, Goodrich and other appraisers say they have never been in a tougher spot. Some real estate agents are blaming them for killing deals and not signing off on high house prices.
“I’ve never seen a market like this in my life,” Goodrich says. “Without question, some buyers are making ridiculous offers.”
If a buyer uses a bank loan to make good on his ridiculous offer, the lender hires an appraiser to confirm the house’s value. That’s where it becomes complicated for appraisers. Instead of anchoring their numbers in past sales, they are in the midst of
a market that is changing in real time.
“I am losing sleep over the appraisals,” says real estate agent Julie Provenzano. She had a “hip pocket” listing—meaning it wasn’t formally in the Multiple Listing Service—in the Park Cities just below $2 million earlier this year. She received two offers, and the house quickly went under contract. But two weeks later, the appraisal came back $100,000 below the contract price. “By the grace of the real estate gods, the buyers were putting down a lot of cash, and they agreed to move forward in spite of the appraisal,” Provenzano says. “But if that hadn’t happened, the deal would have been dead in the water.”
An appraisal is not necessarily supposed to reflect the highest offer on a property. Rather, it is an opinion of the house’s most probable sales price in the open market reached after evaluating other sales on comparable houses. “We’re trying to land it right down the middle,” Goodrich says.
Real estate agents are routinely meeting appraisers for their appointments, handing over information on comparable sales to back up their contract price. A smart agent can help guide the appraiser to a higher value. “I don’t ever try to tell them how to do their job, but I always take them a packet,” says agent Ann Stewart. “And usually, they really appreciate it.”
Another factor complicating the work of appraisers is the number of transactions occurring on the hip-pocket market. Appraisers can’t easily access those prices, but many agents know of their existence through word of mouth. Provenzano knew of two such deals that helped her price the $2 million Park Cities listing. But because they weren’t in the system, she needed agents to hand over copies of the closing statements—something they are hesitant to do, as many buyers prefer to keep their transaction details private. (And, for some, hidden from city tax assessors.)
Not everyone is praying for lenient appraisers. Agent Rhonda Reddic remembers the dark days of 2007 to 2009, just after the market crashed, when paychecks were few and far between. Because of that, she hopes appraisers can help keep the market under control.
“Many of my colleagues are saying, ‘Those darn appraisers!’ ” Reddic says. “But I think they are a vital check on the system.”