By Troy Corman, www.t2realestate.com
I'm putting in an offer for a buyer of a foreclosure home that is listed for $69,000. There have been only a couple of sales in the neighborhood (that were both foreclosures) in the last 2 years. As a result, my buyer's lender, Bank of America, comes back with a desktop appraisal of $77,000. This particular home, on the market for 9 days, has 22 offers on it. Do you really think it's only worth $77,000? A VERY similar home across the street is for sale for $119,000.
I don't know yet if Bank of America will do a more thorough appraisal if we win the bid, but I've heard stories of banks low-balling appraisals since they're drowning in bad loans. In essence, as Del Walmsley of Lifestyles Unlimited recently shared on his radio show, the banks are basically cutting off their nose to spite their face. By low-balling appraisals on new loans, they are making the property values of their existing loans in the same neighborhood worth less, which in turn makes their existing borrowers more susceptible to getting upside down - and creating even more foreclosures.
Again, 9 days on the market at $69K and the home has 22 offers. I think it's safe to say that Bank of America's appraisal of $77K is a hair off.