About four months ago, I spoke with the seller of a home. He was asking about $850K, and the property had been on the market over six months–and the seller was now "For Sale By Owner." I thought his problem was that he was about $50K over market, but he assured me that he had an appraisal on the property for $1.2 million, and wasn’t dropping his price. He never did sell it– the property is currently rented out.
I received an interesting article from Stephen G. Bishop, a former appraiser. I realized that appraisals were works of fiction long ago, but Stephen’s article took me by surprise– I didn’t think the industry was as sleazy as he described. I sent his article on to a realtor for a second opinion. He assured me that, in his experience, Stephen’s The Truth About Real Estate was accurate.
While a number of factors are considered to have contributed to the housing bubble, Stephen offers this idea as well:
While supply and demand may play a role in real estate market prices, one needs to consider what creates extraordinary demand when no other factors change significantly. A dramatic run up in prices, when incomes are flat, supply is sufficient, consumer credit is overextended, the cost of living rises constantly and prosperity lies in the hands of the elite, can only be attributed to one primary cause, inflated appraisals. If an appraiser doesn’t hit the number, they don’t work. The fundamental relationship between an appraiser and those who employ them guarantee it.
