Here’s what to know about handling markets that are a shift in values
Mortgage brokers operating in markets undergoing a shift in values are facing growing appraisal-related challenges – but those are preventable, according to a leading valuations expert, if they know what to look for in advance.
Chad Barker (pictured top), president of Velox Valuations, told Mortgage Professional America the gap between what brokers understand about the appraisal process and what appraisers are navigating can create unnecessary friction for clients on both sides of a transaction.
“Appraising is very much an experience-based profession,” he said. “And if you have experience being able to develop credible opinions of value in markets that are in transition, that’s very valuable to a mortgage professional – because that can trickle through to the consumer and make sure that consumer is making good decisions.”
How time adjustments work
One area that’s widely misunderstood, according to Barker, is how appraisers handle what’s known as a “market in transition” – a term used to describe any market that’s actively moving either up or down, rather than holding steady.
When a market is declining, an appraiser will look at recent comparable sales and may find them running below the agreed purchase price. The appraiser then applies downward time adjustments – adjusting values based on where trend lines are heading, not just where recent sales have come in.
The same approach applies in rising markets. “If you have a market that’s increasing significantly, you have the same situation – offers and accepted purchases occurring, and then you look at recent sales and they’re lower because the market’s increasing,” Barker said. “So it really works both ways.”
Read more: How an appraisal gap impacts your mortgage
In a declining market, appraisals that come in below purchase price directly affect loan-to-value rations – which determine how much a borrower can lend against the property. “You’ll often see purchase transactions renegotiated based on appraised value,” Barker said. “Or buyers bring more money to the table, or they just have to understand the purchase price they’re paying.”
What brokers should tell their refinance clients
That challenge is especially apparent on the refinance side, where clients may not realize how much their equity position has changed. Barker’s advice to mortgage brokers: get ahead of potential appraisal outcomes before clients are caught off guard.
“If they’re in those markets of transition, they need to be anticipatory to that as they’re working with those loan applicants,” he said. “Where a loan applicant may have purchased something a year ago – even six months ago in some cases – if there’s a reason to compel them to refi and they’re in one of those market transition areas, being able to be upfront about that really brings value to the consumer.”
Read more: Will cash-out refinances spike in 2026?
That transparency, according to Barker, is what separates brokers who build lasting client relationships from those who leave clients feeling blindsided by the realities of appraisal in a shifting US housing market.
It isn’t only realtors and borrowers adjusting their behavior in that environment. Cash-buying investors – a group that historically has moved quickly independently – are also seeking appraisals in declining markets as a risk management tool.
“When a market’s increasing, they’ll pay cash and not have a lot of concern,” Barker said. “But in a decreasing market, even if they’re a cash buyer, they may go out and just get an independent appraisal to better understand that transition in those trend lines in that market.”
Read more: How much a borrower can lend against a property
Not all appraisers are equally suited to all assignments – and matching the right professional to the right property type matters more than many brokers realize.
“There are appraisers that deal with complex assignments, standard assignments. There are appraisers that will focus on investment properties, or focus on different property types,” Barker said.
He pointed to New York co-ops as one example of a highly specialized property category where appraiser experience is particularly consequential.
“If you can find that resource – an appraiser that understands your market, the market conditions, the property types – then from a mortgage professional’s perspective, you can pass that information through in confidence to the loan prospect you have in front of you,” he said.
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