A
real estate appraiser is NOT the one who is consulted with FIRST to determine
or establish fair market value of homes for sale on the market ... it was a
REALTOR who FIRST set or established the sales price! A real estate
appraiser comes along much later in the process... AFTER the Buyer and Seller
have already agreed to the sales price in the real estate contract. An agent
representing the buyer has counseled his client already on what to offer for
the property by conducting a Comparative Market Analysis (CMA), by rendering a
Broker's Price Opinion (BPO), or by furnishing his buyer client with a
comprehensive Realtors' Property Resource (RPR) quantitative and statistical
report and analysis suggesting the current fair market value of the subject
property. Before, or prior to, the Seller and Buyer coming to an agreement on
the sales price of a home; rarely, if ever, is a real estate appraiser
consulted with first.
The
definition of fair market value is: the price an able willing Buyer is
willing to pay for something under no obligation or coercion, and the price a
Seller is willing to sell something who is also not forced to sell or who has
no obligation and has not been coerced into selling something. In other
words, "fair market value" is determined by agreement of Buyers and
Sellers, NOT by the opinion of value of a real estate appraiser.
An
appraiser may "validate" or "rubber stamp" the sales price
for the buyer's mortgage lender, investor or underwriter to protect the lender
or investor's interest in putting up the money for the buyer to acquire the
property; but their opinion of value alone DOES NOT establish fair market
value. Fair market value is always determined by agreement of free, able
and willing buyers and sellers, and NOT by real estate appraisers per se.
Typically,
the real estate appraiser's fee is always paid by the Buyer as part of their
lender's closing costs. I have heard real estate appraisers say, "I
work for the lender in this transaction". WRONG!! You work for the one who
pays you! Since the buyer is ultimately paying the real estate
appraiser's fee as part of the lender's fees and charges, the real estate
appraiser's fiduciary duty and loyalty must be to the buyer, and not to the
lender directly. The Buyer is the real estate appraiser's client, NOT the
lender.
And
since the Buyer is the one who is paying the real estate appraiser, the Buyer
(not the lender) should be the one who selects or chooses the appraiser or
appraisal management company (AMC) to conduct the financing contingency
appraisal pursuant to the sales contract. The lender is NOT a party to the
sales contract; it is typically between Seller and Buyer alone. The sales
contract between Buyer and Seller typically does not require third party
approval. The real estate sales contract financing contingency should not
be confused with a legal requirement for third party approval such as by a
court in a bankruptcy case, where a Trustee has been appointed by the court,
etc. The Buyer and Seller in a real estate sales contract are free to
choose whoever they want as the appraiser, and be bound (or not bound) by the opinion
of value of the residential real estate appraiser. A real estate
appraiser renders and OPINION of fair market value. This OPINION
is certainly rebuttable. Real estate appraisers often are not as familiar
with a particular neighborhood or subdivision as the Realtors or agents
involved in the transaction.
