The Real Estate Appraisal In A Declining Market

In today's declining real estate market lenders are reluctant to make loans for several reasons. But they need to make good loans to be able to sell the loan on the secondary market and also to stay in business. Therefore, real estate appraisals that accurately reflect the market today and trends in that particular area are scrutinized more critically than ever before for market value and lending decisions.

Consequently, this is why it is so important that all parties in the transaction (lender, seller and/or buyer) utilize an appraisal firm that is highly experienced and knowledgeable of both the micro and macro economics of that particular market. No one can predict the future with total accuracy, but lenders will be conservative and utilize the worst case scenario to deterimine not only today's market/appraised value of a particular real estate parcel, but will also try to project the future market value of the parcel before making a lending decision. Lenders will not typically lend in a declining market area. They would be foolish to do so.

Potential buyers, therefore, need to be cognizant of this particularly important factor today in the real estate purchase process. Employ the best appraisal company and get a legitimate appraisal first. Otherwise, your dream home purchase can be just that, a dream for now, if the market value of the property is still in the declining stage. There are some ways to get around this obstacle, (to be discussed with the lender) but typically the lender will require a bigger and more substantial down payment. However, this is obviously not the best tactic to employ, as the buyer would then be taking most of the risk. Therefore, it is safer and more prudent to either wait for the market to stabilize, or buy your next home in another area, where home values have already turned around and back into stable or rising market condition.