Broker frustrated by bidding wars

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Brokers are once again venting their frustration with the discrepancy between appraisal prices and sale prices of homes; though it isn’t the appraisers’ fault, according to one broker.

“The value of properties is one of the most frustrating things I’ve faced in my business; a lot of times clients engage in bidding wars and in many cases the offer comes in and it is well above the appraisal value,” Christine Xu of Mortgage Architects told “Many people are over-paying for homes.”

Several industry players have complained about, what they believe to be, outdated and inaccurate appraisals and have called for a reform that will take into account other valuations when deciding the value of a home.

“Appraisals aren’t coming in at the proper value; they’re not coming in at purchase price,” Anthony Ambrosio of CSI Mortgages told in mid-June. “The appraisers look at market data that is old – they’re always looking backward and not forward.”

According to Ambrosio, homes he is having appraised now are being valued at winter prices, when the market was slower and prices were lower.
But it isn’t the inaccuracy of the appraisals that is the issue, according to Xu. It’s the dearth of housing supply that is causing inflated prices.

“Because of the hype of the market people in the hot areas, people want to buy properties and there aren’t too many available,” Xu said. “Once a property becomes available there are many buyers interested in purchasing it.”

Multiple bids ensure homes in many hot markets sell within ten days, according to Xu.

“Many people are over-paying for properties.”
  • Rick (Mortgage Mentor) Robertson on 2014-07-03 12:59:20 PM

    Lenders are not fully interested in "Market Value". The successful, thriving Canadian banking/lending system's conservative perspective is "Lending Value" and consideration for what the lender may be able to sell the property for in the future if the borrower defaults. (After all, that same real estate market that pushes selling prices up is the same group that heavily promotes foreclosures as being a "deal".)

    If I were the lender and believed there was any size of a market bubble, I would not be basing my lending calculations on a suddenly inflated "Selling" price.

    That is mostly the reason that we will not see private lenders and M.I.C.s lending more that 80% today.

    Just because some realtors are good at creating "market excitement" and getting a high price for a listing, doesn't mean that appraisers or lenders are obligated to change their time proven practices.

  • Ian March on 2014-07-03 1:17:23 PM

    The Major problem is that certain lenders are not declining when a home is sold over price. I am involved with new and resale homes and I see the discrepancies. In Ontario Government is also to blame requiring too high a density which artificially pushes up prices.

  • Jay on 2014-07-03 5:00:45 PM

    When one or more parties get caught up in the excitement of a bidding war, the psychological effect can be extremely powerful. This does not necessarily mean that winning bid equates the actual market value. What it can mean is that people get caught up in the emotion of it all. When an appraisal comes in below the frantic bidding war price, it can also mean that the appraiser is saving the buyers from themselves. An informed broker will be grateful for the fact that his clients were just protected and if the clients are brought up to speed then they will/should be happy and spread the work about their wonderful caring broker and the fine upstanding appraiser. In the short run, sure the broker doesn't get that immediate commission, but in the long run it pays off huge in positive word of mouth and a great reputation that money just can't buy.

  • Keith Lancastle on 2014-07-04 9:44:51 AM

    Similar to our response to an article published on June 18th, “Brokers call for appraisal changes”, we would again like to correct misconceptions about the appraisal profession that may result from the inaccuracies within the article, “Broker Frustrated by Bidding Wars.”

    Unfortunately, the same quote is included in this article as in the June 18th article, “the appraisers look at market data that are old – they’re always looking backward and not forward.” This comment continues to fuel a profound misunderstanding of appraisal methodology and the benefit of engaging a professional and designated appraiser to provide an independent and unbiased opinion of value, particularly in a sellers’ market.

    The Appraisal Institute of Canada agrees that when there are multiple offers on a home, an inflated selling price can result. As we saw in the global financial crisis, over inflated real estate prices may have an impact on the long-term stability of a country’s lending system, the real estate market, and - most importantly - its consumers. The reason Canada averted this economic crisis is due, in part, to the strong valuation fundamentals within the real estate market and the role valuation plays within the financial system.

    We would also like to reiterate the appraisal methodology. To carry out their work, AIC-designated appraisers consider a number of factors, including past sales. Current market conditions are also taken into account in the analysis of the information and in the preparation of the appraisal. Adjustments are made to the sale price of the comparable properties based on market-derived elements of comparison. An opinion of value, either a single value or a range of values, is arrived at by reconciling the adjusted sales prices of the comparable properties. For more detailed information about the various methodologies used in real estate appraisals, please view our Industry Guide to Understanding the Fundamentals of Real Estate Appraisal (

    We would also remind you that an AIC-designated appraiser has a professional and ethical responsibility to provide an independent and unbiased opinion of the value of a property. All of our members must comply with the Canadian Uniform Standards of Professional Practice (CUSPAP), a Code of Conduct and Regulations. As professionals, AIC members are obligated to prepare their work in compliance with these standards.

    For more information, we again encourage readers to visit www.

    Keith Lancastle
    Chief Executive Officer
    Appraisal Institute of Canada

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