subject: Why Pay High Closing Costs When Buying And Selling A House? [print this page] There's a relatively unknown problem creeping into real estate transactions in this tight mortgage market and it is causing some sellers to consider selling a house for cash in order to avoid delays. The problem is related to property appraisals. This problem can affect you and the sale of your home, so it's good to understand the impact of recent changes in the appraisal methods used by national lenders.
The best way to describe the problem is simply to say that it's cheaper to use county tax assessor's records that are available online, usually for free, than to hire a live human being with professional credentials as a real estate appraiser to go out and look at a home to conduct an appraisal. Now, this makes some sense in theory, but in practice it's causing a big mess.
The reason it's causing a mess is because computers do not have all the information, starting with local county assessors' offices whose records are frequently inaccurate, and moving along to the fact that computers are not always smart about the way they select comparable properties. In other words, a computer is thinking that proximity is more important than similarity.
Here's an example when trying to sell a house: You own a 3,600 square foot brick home that was built in the last 10 years on a lot in a more established neighborhood. Some of the older frame homes in your neighborhood are also similar in square footage, but they are much older and they are not brick. A computer is not putting two and two together and selecting another brick home a little farther from your neighborhood to compare values. No, it is selecting the considerably older, frame homes next door to yours. That's what is mean by proximity not similarity.
And it's easy to see how it could cause a big discrepancy in the valuation of your home. A human appraiser would immediately see the situation and select a series of brick homes that are located nearby, not necessarily on your street, your block or even your same subdivision. An appraiser will have more sensitivity to the characteristics of your home than a computer program could possibly have.
A seller who is considering selling a home for cash because he has been involved in a failed transaction due to a poor-quality appraisal will generally tell you that it's a problem with national and online lenders. Local banks tend to stick with local, live appraisers so the quality and reality of the appraisal works better for both the seller and the buyer. But if you find yourself in a time crunch because you have missed out on a pending sale you will discover that selling a home for cash may work better for you, too.
