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"People" don't. It's a required part of the due diligence to get a mortgage. No appraisal, no loan. For the most part, the banks and brokers re-sell those loan

"People" don't. It's a required part of the due diligence to get a mortgage. No appraisal, no loan. For the most part, the banks and brokers re-sell those loans immediately, so they don't stay on their books. All they need to protect them from lawsuits later is proof that they followed the process to the letter -- which involves getting a written appraisal. No mortgage broker or Realtor ever got rich by picking a fight with the appraiser to lower the appraised value ... there is literally nobody present at the table who has an incentive to push the value down.

DennisP 10y ago
Aside from the buyer, who can pay for his own appraisal.
- JamesBarney 10y ago
  Usually a buyer has already agreed to buy a house at a certain price. So if the appraisal comes back low, the seller doesn't lower the price. Instead the buyer just doesn't get a loan so they don't get to purchase the house they had their heart set on.
  - DennisP 10y ago
    A friend of mine saved $15K on a house because the appraisal came in low. If the bank won't write a loan for the agreed price, the original contract is void, since it's contingent on loan approval. If the seller's heart is set on moving, he might well lower the price.
    - URSpider94 10y ago
      Really depends. In the Bay Area these days, sellers will usually only take offers with zero contingencies (because they can). Even if you do get a financing contingency in your offer and the deal falls through because of a low appraisal, there's almost always a back-up offer waiting in the wings that can cover the low appraisal with an additional downpayment (the bank doesn't really care about if the house appraises for the selling price, they just want to make sure that their Loan-to-value (LTV) ratio is OK.
      - smsm42 10y ago
        That's really playing with fire. Good RE agent would tell their client so. Even if you're rich and buying in cash, at least inspection contingency is a must, but otherwise unless you have tons of money and don't really care for nasty surprises inspection could uncover - zero contingency is the riskiest bet one can make in one's life. My opinion, if you're on the market where sellers won't accept a contingent offer, it's better to get out of that market. I've bought house in BA recently, and there were plenty of sellers willing to take contingent offers (backed by some solid bank paperwork, maybe, but not just requiring to commit blindly). Of course, BA has many different places and in some market could be so hot sellers can get away with anything. But it's usually not good to get in such place as a buyer.
        deleted 10y ago
        [deleted]
        URSpider94 10y ago
        Usually, the seller provides an inspection report performed in advance. It's a big leap (I did this a year ago ...) and my Realtor is as old-school as they come, but if you want a single-family property in a hot area, it seems to be table stakes.
    - EpicEng 10y ago
      Sure, just depends on whether or not there are other parties who will pay the Delta.
  - dawnerd 10y ago
    Happened to me when I sold my house the value came in 10k lower (really... now that same place is 30-40k higher than what I was asking a year ago).
leereeves 10y ago
I understand that it's required, and that organizations often follow processes long after they're revealed to be foolish. But it's been a decade now since the housing bubble revealed that appraisals are meaningless. Why has no one eliminated them?
- mcherm 10y ago
  They are required by law or by long-standing policy in a government-run body (which is practically the same thing). Laws DO change to keep up with the times, but they do so rather slowly. In 50 to 100 years, if there is continuous clear evidence that home assessments are highly unreliable and not particularly profitable to anyone, then you should expect them to be eliminated.
- dragonwriter 10y ago
  Because they reasons they were required were still valid, so instead efforts were directed at the factors that made them ineffective at addressing the need motivating them. Whether those efforts were successful or not is another discussion.
gozur88 10y ago
This. As long as the appraisal is close enough for plausible deniability, it serves the purpose. The originator just needs a number that's close enough for reality that whoever they sell the loan to (probably the government) can't come back and accuse them of fraud.

DennisP 10y ago

Aside from the buyer, who can pay for his own appraisal.

JamesBarney 10y ago
Usually a buyer has already agreed to buy a house at a certain price. So if the appraisal comes back low, the seller doesn't lower the price. Instead the buyer just doesn't get a loan so they don't get to purchase the house they had their heart set on.
- DennisP 10y ago
  A friend of mine saved $15K on a house because the appraisal came in low. If the bank won't write a loan for the agreed price, the original contract is void, since it's contingent on loan approval. If the seller's heart is set on moving, he might well lower the price.
  - URSpider94 10y ago
    Really depends. In the Bay Area these days, sellers will usually only take offers with zero contingencies (because they can). Even if you do get a financing contingency in your offer and the deal falls through because of a low appraisal, there's almost always a back-up offer waiting in the wings that can cover the low appraisal with an additional downpayment (the bank doesn't really care about if the house appraises for the selling price, they just want to make sure that their Loan-to-value (LTV) ratio is OK.
    - smsm42 10y ago
      That's really playing with fire. Good RE agent would tell their client so. Even if you're rich and buying in cash, at least inspection contingency is a must, but otherwise unless you have tons of money and don't really care for nasty surprises inspection could uncover - zero contingency is the riskiest bet one can make in one's life. My opinion, if you're on the market where sellers won't accept a contingent offer, it's better to get out of that market. I've bought house in BA recently, and there were plenty of sellers willing to take contingent offers (backed by some solid bank paperwork, maybe, but not just requiring to commit blindly). Of course, BA has many different places and in some market could be so hot sellers can get away with anything. But it's usually not good to get in such place as a buyer.
      - deleted 10y ago
        [deleted]
      - URSpider94 10y ago
        Usually, the seller provides an inspection report performed in advance. It's a big leap (I did this a year ago ...) and my Realtor is as old-school as they come, but if you want a single-family property in a hot area, it seems to be table stakes.
  - EpicEng 10y ago
    Sure, just depends on whether or not there are other parties who will pay the Delta.
- dawnerd 10y ago
  Happened to me when I sold my house the value came in 10k lower (really... now that same place is 30-40k higher than what I was asking a year ago).

leereeves 10y ago

I understand that it's required, and that organizations often follow processes long after they're revealed to be foolish. But it's been a decade now since the housing bubble revealed that appraisals are meaningless. Why has no one eliminated them?

mcherm 10y ago
They are required by law or by long-standing policy in a government-run body (which is practically the same thing). Laws DO change to keep up with the times, but they do so rather slowly. In 50 to 100 years, if there is continuous clear evidence that home assessments are highly unreliable and not particularly profitable to anyone, then you should expect them to be eliminated.
dragonwriter 10y ago
Because they reasons they were required were still valid, so instead efforts were directed at the factors that made them ineffective at addressing the need motivating them. Whether those efforts were successful or not is another discussion.

gozur88 10y ago

This. As long as the appraisal is close enough for plausible deniability, it serves the purpose. The originator just needs a number that's close enough for reality that whoever they sell the loan to (probably the government) can't come back and accuse them of fraud.