Real Estate Question - Appraisal

Discussion in 'Real Estate' started by KCClone1, Feb 15, 2017.

  1. KCClone1

    KCClone1 Active Member

    Feb 28, 2010
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    I recently bought a house in the DM area. There were other bids so I ended up paying more than the list price. When the appraisal came back it was the same exact amount as my accepted offer. This seems a little fishy to me, but I suppose it could be a coincidence. So my question for the experts at CF is...are appraisal companies made aware of the sale price and if so, why? I know there is a lotto system which chooses the appraisal company, but I don't think they should know how much I paid when they conduct the appraisal to keep it unbiased.
     
  2. SCNCY

    SCNCY Well-Known Member

    Sep 11, 2009
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    I can't answer your question, but I bought a house for 108k, my appraisal came in at 109k. My agent said that the appraisals almost always came in at slightly above the sale price of the house because they don't want to get in the way of the sale. Unless the house is in real bad shape and the sale price is far from the what the appraiser thinks the house is worth, then they will go below the sale price.
     
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  3. isufbcurt

    isufbcurt Well-Known Member

    Apr 21, 2006
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    Same boat as you, but our situation was a little different.

    We bought our house on contract from the seller, so we could take possession and move in while we waited for our old house to sell. We then secured a mortgage from the bank to pay off the contract with the seller as soon as our old house sold. We didn't get an appraisal for the contract sale but had to get one for the bank mortgage. When the appraiser showed up, I showed him around and he flat out asked me how much we paid, I told him and magically the appraisal was for that amount.

    It's funny too because since our house is unique (log home) he mentioned all these other log homes in a 100 mile radius has had to go look at and get assessor information for to use as comparable properties.
     
  4. 3GenClone

    3GenClone Well-Known Member

    Jun 28, 2009
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    I would assume so, because how would they be able to assess property value in that area without knowing what similar properties sold for?

    http://money.usnews.com/money/personal-finance/articles/2015/08/20/what-you-need-to-know-about-home-appraisals
     
  5. ArgentCy

    ArgentCy Well-Known Member

    Jan 13, 2010
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    Yes we must see the sales contract for most transactions. There are a few clients and situations where they will black out the price. They are also supposed to list all concessions in case they try to put a boat or something that can inflate the price.
     
  6. Clonefan32

    Clonefan32 Well-Known Member

    Nov 19, 2008
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    I have heard that real estate appraisers doing appraisals for a bank don't get paid unless the loan goes through.
     
  7. mapnerd

    mapnerd Well-Known Member

    Aug 17, 2006
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    This happens all the time.
     
  8. ArgentCy

    ArgentCy Well-Known Member

    Jan 13, 2010
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    The problem really arises from how the appraisal and banks have developed the forms. Houses aren't really worth one price. Just think if you had negotiated tougher and instead of $100,000 you pay say $99,000. Well within the range of error. I think the national average is about 88-95% of appraisals come back at or above the sales price.

    But what happens if the appraiser believes that $99,000 really is the most probable price and the contract was for $100,000?

    Likely the results in general, it probably just means that you are paying towards the higher range of values for the house which should be known because of the multiple bids and selling over list price.
     
  9. ArgentCy

    ArgentCy Well-Known Member

    Jan 13, 2010
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    Illegal and against our license these days. May have been a slight problem at times in the past.
     
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  10. DSMCy

    DSMCy Well-Known Member

    Feb 1, 2013
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    I had a friend buy a town house. Appraisal actually came back about $20K less than the sale price. Friend decided to make up the difference on the down payment.
    Tried talking him out of it but he really wanted that town house.
     
  11. KnappShack

    KnappShack Well-Known Member

    May 26, 2008
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    And an appraisal is a supported estimate of market value. If 2 parties agree to the transaction then that actually is the market value.

    The OP shouldn't be worried.
     
  12. KCClone1

    KCClone1 Active Member

    Feb 28, 2010
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    I'm not worried and it wasn't very much over list price. It's just frustrating to pay for an appraisal when they just set it at the sale price. I feel I could have done that.
     
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  13. ArgentCy

    ArgentCy Well-Known Member

    Jan 13, 2010
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    Exactly, some would like to argue that is the value of the house. I don't think that is always the case because you have to have well informed Arms-Length parties yada yada yada. If everything is normal then the market value and the sales contract price are usually pretty close. But every market has some natural variance, ie the house might sell for slightly more in March or with warmer weather than it does in January with snow outside. That doesn't really mean the market or house has changed at all.
     
  14. CyGrad04

    CyGrad04 Member

    Sep 16, 2011
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    I am a commercial lender, but all appraisals are similar in concept. Appraisals are based on recent similar home sales/comparables(Other houses in your neighborhood sold in the last 6-12 months). The price you are willing to pay for the home you are buying is the best/most recent price. As long as you don't have a price that can't be reasonably backed up by similar comparable sales, the appraised value should be the same or very close to your purchase price.

    If this was not allowed, no appraisal would ever come in at a sufficient value in times that the market is experiencing price increases, as all appraisals are based on historical information, not what the market is doing today, or will do in the future.

    The fact that there was more than 1 offer proves there are not enough homes on the market, which is why prices are currently going up(Or at least they are in Ankeny/WDM)
     
  15. ArgentCy

    ArgentCy Well-Known Member

    Jan 13, 2010
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    Read through it and look at the comps to see if they are similar to your house or in what ways they are inferior or superior. I know it seems like the end result is all the same and anyone could just get back to where they started, so to speak, but there should be a decent amount of work in between. Would you feel better if it was 25% more or less than you paid?

    Regardless the appraisal is really for the bank and they are the client as they, supposedly, want to know what they are lending money on is worth it. Can you imagine what the market would do if buyers just signed off on the appraisal at whatever they offered for the house?
     
  16. cydline2cydline

    cydline2cydline Active Member

    Sep 17, 2011
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    In concept and appraisal is meant to be how much your home is worth on the market. As such, you are willing to pay X amount of dollars for the home, so shouldn't it be appraised at the value the market decided (which was you buying the home). Unless there is some big read flag (like the 20k guys story) it should be equivalent.
     
  17. ArgentCy

    ArgentCy Well-Known Member

    Jan 13, 2010
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    There can be several reasons that it is out of line. The most common is with out-of-town buyers who are used to a different market and don't get great counseling from a realtor or are buying FSBO. Sometimes buyers just really want a specific home for some reason and overpay or occasionally we might see problems with the house that might be cropping up that have been missed.
     
  18. KnappShack

    KnappShack Well-Known Member

    May 26, 2008
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    It's all part of the process. Hope you enjoy your new home

    Best of luck!
     
  19. IowaRealEstate

    Oct 15, 2012
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    good question. Time for a little "truth".

    Banks like making money. Lots and lots of money. They do this by making loans on things like homes. They WANT the house to appraise. And so does the buyer, seller, appraiser, agent, etc.

    Everybody wins when the home appraises.

    To gain access to the home, the appraiser contacts the . . . you guessed it, the agent to get inside. The agent wants to protect the sale they just made so they can get paid so they often tell the appraiser what the purchase price is to make sure that value gets hit.

    The appraisal is NOT putting an exact value on the home (even though some will say it is), but it is instead making sure that the home is "worth" what the buyer is willing to pay so the lender does not get screwed on the loan they are about to make.

    I have been selling real estate for 12 years and I have had a house not appraise for at least the purchase price probably 10 times. In most of those cases, the appraiser was using foreclosures as comps so that skewed the value.
     
  20. ArgentCy

    ArgentCy Well-Known Member

    Jan 13, 2010
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    #20 ArgentCy, Feb 15, 2017
    Last edited: Feb 15, 2017
    Technically, the appraiser is the Only person who does not "want" the property to appraise. We cannot have a bias one way or another before starting. However, the way things are setup it would only cause lots of unnecessary problems due to the poorly designed systems. Refinance appraisals are probably statistically more near the mid-point of the range than sales transactions.

    We also take on a lot of the potential liability if things go wrong as lawyers will be able to find problems and that is how they designed the stupid forms. Banks certainly take a risk but they have money from down payments, interest already collected, and mortgage insurance. If that's not enough they can go back and start suing people involved. The only thing the appraiser gets is a small fee which may only be half or less of what the borrower pays. Hence, it's hard to get an appraiser at times these days.
     

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