Having Appraisal Issues?

Why do we bother to pick a price to sell a home anymore, when the appraiser has the final say in value?

This doesn't seem all that illogical, though. You should only be selling your home for what it's worth, right? But who gets to decide the value anymore? The tax assessor? The listing agent? The seller? The licensed appraiser? In my book, none of these should ultimately decide the value. It is always the buyer that decides the value. Hasn't it been a long time economic fact that supply and demand, determine value? And as long as the consumer sets down the dollar amount for that commodity, haven't they just set the value? Let's only talk about non necessity items here, and true competitive capitalism. Because when the buyer doesn't have any choice on whether he/she needs an item, or have any choices for such items, then they truly don't have much to say when determining value. But in any normal marketplace, buyers have their freedom to choose. And when they find the right color, size, flavor, shape… for the right price… they buy it. And if they can negotiate, they will. And if it's not priced within reason, they also have the freedom to walk away.

But I am speaking specifically about houses now. In a lot of larger ticket priced items, like real estate, there is financing involved. Adding a partner to the transaction. This partner is actually the larger share holder, and thus requiring this 3^rd party appraiser. Not the one, who has shopped in the competitive marketplace. Not the one, who has to live in the house, or drive to work from this house. Not the one who picked it to be near a certain school, or live closer to their family. A non biased, and non personal, cursory overview of the recently sold homes for the area. And if there are no recently sold homes for that area, then it becomes the appraiser's subjective opinion.

But, then again, this is the bank, that is the one shelling out usually more than three quarters of all the money for this home. Surely, they must have hired someone really great to protect their investment in this asset? Actually, that is not the case anymore. Helped by some new government guidelines, banks now feel that the ambiguity of the appraiser is a better way to choose the one determining value. Not based on local experience or tenure, or any other quality. Just pick someone, that doesn't know someone in the transaction and is licensed. And to be fair, and non biased, make it more like picking a name out of a hat. The appraisal industry used to run like normal capitalism. Banks would choose an appraisal company usually based on the following : competitive pricing, availability, speed in turnaround, and size of support staff. Now, it is random selection. The larger experienced appraisers, seem to get no more business than the newer or less entrepreneurial appraisers. Those that made a good living, now are changing industries to continue making a good living. Those that struggled before, are finding themselves getting randomly selected more often, because being in a rotation is better than fierce competition.
Too many deals are falling apart based on this new system. When a buyer makes an offer, usually, they have seen 20 to 50 houses before making a decision. They, themselves are a pretty good judge of value by now. It's pretty obvious to spot the one overpriced house. So, why does the appraisal trend today, find a large percentage of homes are overpriced?

I think it is the new system. The appraiser has no allegience but to the rotation. In the past, they were part of the deal. Using relationships and knowledge to put together common sense to create value. But today, it is like the DMV. Get in line, wheres my ticket, get back in line. I understand where the corruption was, and agree with regulation (that is an entirely different blogpost). But is this trend coming from the new system healthy to the market? No way. It's adding more downward pressure on the housing prices, and it is also killing deals. And that is causing homes to stay on the market longer, looking for another buyer with a different appraiser, in the rotation, perhaps with a different opinion.

If this is the new era of real estate, then perhaps we should cut to the appraisal first.