WSJ warns about inflated home valuations

My comments are based on a Wall Street Journal front page article dated 07/22/06.

Up until fairly recently residential real estate appraisers had a lot of incentive to make rosy best case scenario valuations that may have been somewhat justifiable only because the market was moving so fast. Banks and appraisers are now getting more conservative based on a slower market.The problem now is that people who bought in the recent past received loans based on those inflated valuations. For some people, if they need to sell or refi they may find that they have a problem because they will owe more than the current value.

If you think you may be at risk for this type of home valuation problem, be proactive! At the very least get a market evaluation of your home by a good real estate agent, compare that valuation to the appraisal that was done when you first bought the problem, and check your loan statement to see if you owe more than th current market value.

Talk to a good real estate lawyer, mortgage broker, and real estate salesperson before you start running into problems. If you see you have a problem or are heading towards one you may have more of a chance to minimize the costs of the problem as well as to rectify it. This may be a good time for some kind of diagnostic to attempt to avoid terminal asset/liability problems.