Appraisal vs Selling Price

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Get your OWN appraiser to give you an UNBIASED opinion. Cal Lester

If the loan appraiser was hired by the homeowner or the mortgage lender, you need to scrap their appraisal and get your own. I've had an appraiser ask me "what does this house NEED to be worth". My request couldn't be totally unreasonable, but you get the picture.

If he appraises the house at $275, the bank isn't going to give you a $295k loan because they know that if you default, they will already have a house worth less than the outstanding mortgage balance. An appraisal of $295k or better is the only way to complete the loan (for now). If the appraiser wants to keep the lender's business coming his way, he would be ill advised to regularly be the cause of failed loan processings. Therefore he appraises at whatever the bank needs him to. Not fair or just, I know, but you're not gonna change the world overnight.

If you are hell bent and determined to buy this house, there is another facet we are missing. Where's the down payment? Suppose the house truly appraises at $265k ($295k-30k in repairs), but the homeowner is asking for $295 as-is. If you have a down payment >$30k the mortgage will be less than the appraised value and the loan may/ should get approved. However, you are throwing away $30k in equity and your house still needs repairing. I'm not advocating this route, I'm just giving you the options.

All that said, get your own appraisal done. It will be well worth the couple hundred bucks. You can also go to the county courthouse (ours is online) and find out the appraised value used for property tax purposes. Our state adjust the appraised values annually and actually inspect each property every three years so the values are fairly accurate.

Oh yeah, and get a comparable market analysis from a local realtor. If every house similar to his is selling for $250k, tell the guy to pound sand.

Have a good weekend all!

Thanks...the assessed value is about 267k. But ours is done once every

5 years. Anyways the other sign is that most of the houses in the area sold around the assessed value.

So may be you are right...I think I should just get my own appraisal done!!! And a realtor should help for sure.

My first thought is that it is a little late to be worried about what the house is worth. You should have known that before you made the offer. The inspector's report can change things. Depending on the terms of your offer, you may be able to use that bring the price down or walk away.

But the bank appraiser's report basically said the house is worth what you offered. Not too bad.

-- Doug

In *addition* (so let me be clear, the other advice offered here looks great, but for this size expense, do this as well) you should go to

and scout out the neighborhood. The site offers recent sales and has data that would take hours, e.g. sq ft info, price per sq ft, number of bed/bath etc. An appraiser uses nearby recent sales data combined with the condition of the house, among other things to come up with a number.

FWIW, when I last refinanced, I told the appraiser I wanted a low-ball appraisal, that the loan I requested was less than half the last assessed value, so I asked for the appraisal to reflect what a quick sale would get. And mostly, I got what I asked for on the bank's dime. JOE

Run from this deal at the highest rate of speed, even if you loose your ernest money! You have an appraiser who falsified his appraisal and a banker who openly admits that the appraisal is likely incorrect.

That doesn't matter. In my old neighborhood every house in the last 2 years had sold for 98% of asking price or better... If they sold. Most of the houses weren't selling at all. You may just have a bunch of people waiting for suckers.

A realtor won't help. He only gets paid if you buy so he will do what it takes to get you to buy. I recently sold my house, and the buyer agent got massive kick-backs to make the deal happen.

Getting your own appraisal may help depending on how desperate the people are to sell, but it really isn't necessary. Just have a friend show up with some cover-alls on. He or she can go through the house with a critical eye, point at things that are in need of repair, then leave. The next day, tell the seller that due to your appraiser's findings, you want another 30K reduction in price (or whatever.)

Ultimately, the house is worth what someone is willing to pay. If you are willing to pay 265K despite the repairs necessary, then that is how much it is worth *to you*.

Thank you Guys!!!! I negotiated the house and got it for 275k. I guess the compelling e-mails I wrote to them worked. Though I think the owners had a wrong time which I think is natural as the emotional bias makes one believe that his/ her home is worth more than it actually is.

Thanks for all the suggestions

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I recently met a guy working as a valuer (the NZ equivalent to an appraiser), and asked him to explain his job a bit.

He noted that, if he over-valued a house (stating that its value was higher than reasonable), he could end up personally liable. Like if the buyer gets a mortgage based on the inflated amount. And then defaults, leaving the bank with a house that isn't really worth enough to cover the amount owed. And, according to him, the bank could actually sue him (the valuer) for a sort of malpractice.

OTOH, things might work differently in the US, as far as whether the bank is selling off the mortgage to some other company, versus carrying it themselves. Bundling and selling off a block of mortgages would muddy the waters and add extra hassle to pointing the finger at parties responsible for losses. Plus the issue of the US being a much bigger market, with larger quantities of defaults to deal with.

For your purpose of deciding how much to spend for the house, NO weight should be given the bank appraisal.

In my opinion, the only purpose of the bank appraisal is to protect the bank -- so that when the examiners come to see if they are giving out bad loans, the bank has an appraisal for at least the amount of the loan on the property.

YOU are the one who decides how much the house is worth to YOU. But it seems to me that if the house was worth $295K to you, and then you subsequently discovered $30K in required repairs, that it should be worth no more than $265K and probably closer to $250K to you, given the pain it is to have all that stuff fixed up.

Again, assuming the faults you posted here were not previously disclosed, you probably have an opportunity to withdraw from the contract without penalty.

If, for some reason, you MUST buy THIS house, then your negotiating options are more restricted.

Even by obtaining comparable values from a realtor, in a fast-moving market, they may not be very reliable in determining what YOU should actually pay for the property. You really need to do your own homework; look at lots of houses; check sales; check the price direction in the area, etc.

Personally, I would not rely on an appraiser to figure out how much I should spend for a house. I would use one if I were arguing with a taxing authority over the value of the house for taxation, but that's a different issue.

I don't believe I've ever bought a home for as much as a realtor said it was worth, nor sold one for as little.

--ron

True, but with the market the way it is and the likelihood that even if the buyer does default it won't be for 6-12 months. There isn't much to hold him to.

I'm curious how many appraisers have been sued by banks and what was the result.

Thank you guys!!! I have one more question though. I do have a PMI, since I put only 5% down and talked to bank who said they take off the PMI within a year under the exceptional case where a structure is added to home. It qualifies as significant addition and if the appraisal causes the value to go higher than the 20% of the mortgage the PMI comes of.

So my question is how this is factored into the appraisal. The bank appraisal now, did the total appraised cost ( land + building) / total living square feet Though I think it should have been Total Building value / total living square feet

Thanks