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Most of the appraisals were not a true appraisal. For a true appraisal, the appraiser should not know the purchase price. They should privde the appraisal value after comparing the property with others without know how much the offer is. But, most of the appraisers try to appraise the property value to the offering price these days. My friend just purchased a property for $408K and the appraisal value is also exactly $408K. It is a joke with such an "appraisal".
I agree with tom. The whole appraisal process is odd (with 3-6 months of old info), mixed in with today's developer driven price point. One should NOT go by an appraisal to determine value. A home is worth what someone is willing to pay (today)....period.
On the other hand, if one is bragging about how they got 3-5 offers over list, I laugh. They merely didn't list it high enough. For the 20% who need to sell their home super quick (like tomorrow), I guess it's an OK strategy, but why leave money on the table (by listing it too low) if you have a month or two to sell?
Realtors might recommend this practice (to churn & earn), but the non-emotional seller will normally list at a number that would prevent this silliness (over list offers). In any market, the home will sell for what the buyer will pay.....and the (smart) seller should list the home at 2-4% higher than that probable number. (not lower)
Exactly. No one I know takes bank appraisals that seriously for all the reasons you previously provided. Treating them as the gospel truth is misguided. Most of these appraisers know very little about the area they're appraising in, I hear this repeatedly too so I'm guessing it's not a rumor. Bank appraisals are just a necessary evil put into place to cover the bank's *ss and only exist to help the bank.
They may be a necessary evil, but since I am not an all-cash buyer, I agree with Riaelise that if the bank thinks the house is only worth a certain amount that they will lend to me, it seems not in my best interest to pay above that amount. I would never do so in my current circumstances. That seems to benefit the seller and the real estate agents greatly but not my family.
I mentioned this thread to my husband last night and we both agreed that we can't conceive of a situation in which we would pay over appraisal, unless it was by a very small amount. I don't get emotionally attached to houses when looking and none of them I saw in this last year were so awesome that I had to have that particular one right nownownow. We expanded our search to a broad area and we took nine months to buy. We ended up paying $10K over asking but not over appraisal. The seller's agent for our house has a tactic of under-pricing her houses by about this amount and setting them on the market for a bidding war over the weekend to drive the price up to what she expects it will be.
If I absolutely, positively couldn't find a house in Austin without paying massive money over appraisal I would move to a different city. I like Austin and I've lived here for 30 years, but I don't love it SO MUCH that I can't imagine living somewhere else and enjoying life. I work in software engineering, in a particularly hot sub-field of it (at least right now) and I could find a job in a ton of other markets.
I have known three friends along with my husband and I who purchased within the last year who were in the 3) category who won their homes because they wrote the sellers a note explaining a little bit about themselves.
When listing homes, our sellers don't ever see that letter until they've chosen the best offer. Then I tell them I have a bunch of letters intended to pull their heart strings and ask if they want to be exposed to those. Some do, most don't. Few change their mind after first unemotionally selecting an offer. But it's a good strategy nonetheless from a buyer standpoint, and I think every buyer should do it. But as a seller, do you want to subsidize your buyer's purchase because you "feel good" about them?
Quote:
Originally Posted by hound 109
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On the other hand, if one is bragging about how they got 3-5 offers over list, I laugh. They merely didn't list it high enough. For the 20% who need to sell their home super quick (like tomorrow)
That's actually not true. It's counter intuitive, but by listing a home at the "sweet spot", you draw more offers, creating more competition, and end up with a higher contract price than if it had been listed higher to start with. For example, I might say to a seller when setting list price "I can get over $300K but only if we price it under $300K". Then I have to spend time explaining what that means and why it is.
But homes that draw 10+ offers and sell $30K over list would not have sold for that much if they had been listed $20K higher to start with. I know it sound weird.
Your putting a lot of validity in a bank appraisal, as if it's the gospel. Do you think bank appraisers set prices that reflect a more accurate market value than does the market itself? Why do you believe that?
Having personally encountered a lot of bank appraisers, and in dealing with them regularly to let them in tenant-occupied homes for client refis, I can with certainty share with you than a good portion of them are pretty stupid. Many rival the dumbest Realtors we encounter, and that's saying a lot, because there are some really dumb idiot Realtors running around in every hot market everywhere.
So, you're basically letting a major life decision about whether to "stay or quit" in a real estate transaction that has already cleared inspection period be dependent on the opinion of an anonymous low income dingbat, who very well could be from Dallas and not even know where Steiner Ranch is (real life example), and who often is so buried with refi work that he/she has 3-5 appraisals a day to crank out?
Not the recipe for a quality product. But you trust it as the final word on value, enough that you'd walk away from a perfectly good house over that alone?
Steve
Most appraisers are not brainless boobs. Isn't that insulting a respectable profession? Just like insulting realtors because there are a few dolts out there. Any appraiser worth his salt actually does know something about the area and the market. For instance, the one my local bank, UFCU, used was based out of Georgetown. He was appraising a property in Round Rock. I do feel that he knew a lot about the area because I actually read his appraisal (all of it) and it was very much in line with the area trend. His methodology in determining the value of my home, using the data he gleaned from a variety of sources (data that I, myself, could verify) was pretty spot on. I don't take an appraiser's word necessarily as gospel, but I do think that most of them don't just spin a wheel and pick a number. Sure they make mistakes -- that's what happens when you have a frenetically paced market and a backlog of properties to inspect. But overall, I think the profession is sound and yeah, I would give their opinion weight unless it is totally out of line.
Would I let a major life decision be determined by a "anonymous low income dingbat"? No. That's when you and your realtor parlay and discuss the pros and cons and maybe analyze things more. It isn't as simplistic as that...it's a sum of all parts. Yes, I would walk away from a "perfectly good home" if, after analyzing everything including the appraisal, I feel that it is over market value. There are many perfectly good homes even here. And that's my point -- when you remove your emotions out of it, you'll see that there are other good homes. Whether you get it this month or next month or whatever, you'll find one. I never had to pay more for a reason and my pocket is happy with that decision.
Quote:
Originally Posted by MrCurmudgeon
Paying over the appraisal value is not necessarily overpaying, at least versus the market. This scenario is not uncommon in fast-rising markets.
Whether or not it's a good idea is another story.
Yes. This. I just won't do it. No real regrets.
Quote:
Originally Posted by Idlewile
Exactly. No one I know takes bank appraisals that seriously for all the reasons you previously provided. Treating them as the gospel truth is misguided. Most of these appraisers know very little about the area they're appraising in, I hear this repeatedly too so I'm guessing it's not a rumor. Bank appraisals are just a necessary evil put into place to cover the bank's *ss and only exist to help the bank.
See above. The appraiser who appraised our house for sale AND the house we bought were based locally. Very locally. As in, based out of the suburban areas where the homes were located. Neither of the lenders sent a person based out of another area. I never treat numbers as absolute truth, I use them in conjunction with my own knowledge of my own area. In the case of my area, the numbers were pretty much in line. And I disagree about the bank appraisals only existing to cover their own ass and help only themselves. Yes, while it's true that they care about their collateral, indirectly they save some people from voluntarily being upside down. Feelings about them aside (and trust me, I have had "bad appraisals" done as well) these people are professionals. Sorry, but I don't consider myself qualified to either appraise or sell real estate so I do give merit to those who are professionals and have done it for awhile, and (like my daughter's math homework) "show their work".
I do not agree with Riaelise. The appraiser get the purchase price of the property from the lender. Then the appraiser does whatever his/she could to match that number. They are manipulating the number with lot of "DATA" that make someone believing that the appraisers are doing their job to appraise the property fairly. To make a fair appraisal, the appraiser should not know how much the property is being offered. In theory, the lender is not allowed to select the appraiser and it is selected ramdonly from the appraiser pool. But, for whatever reason, the appraisers manipulated the number to match the purchase price in may cases I have seen.
I have found that appraisals can vary wildly, so $20K over on one appraisal may be $20K below another appraisal. Bottom line is a house is worth whatever someone is willing to pay for it.
I have known three friends along with my husband and I who purchased within the last year who were in the 3) category who won their homes because they wrote the sellers a note explaining a little bit about themselves. I thought that was frankly ridiculous to have to do when my friends first advised me to write one, but we ended up doing the same thing and because of who the owner of our house was (a non-profit who wanted to see a young family with commitment to the neighborhood), it is the reason we won the house also. In our case, we were the first offer, it was a competitive offer above asking but NOT above appraisal, and the seller took it.
In my friends' cases, they were part of multiple offer scenarios and theirs were not necessarily the highest offers. In one case, the house did not appraise for the offer and the owners lowered the price by $5k to let the contract continue. This house is three blocks down the street from mine and it is a lovely home.
My other friends who successfully won houses this way were a single mom who is a special education teacher in LISD, a young couple where the husband is an Iraq veteran and a firefighter, and another newly-married young couple with a baby buying their first move-up house. They all wrote a narrative for the seller explaining why they wanted the house, any details of how long they'd been looking, and included pictures. This doesn't always work, but it's important to remember the human element in real estate transactions.
When we sold our last home, we had a couple of people who wrote letters. Honestly, they just annoyed me. If you want my house that badly, then pay me for it. If you can't come up with another few thousand dollars, then you really can't afford the house anyway. In the end, we chose the highest offer, which also happened to be cash, which was nice.
I do not agree with Riaelise. The appraiser get the purchase price of the property from the lender. Then the appraiser does whatever his/she could to match that number. They are manipulating the number with lot of "DATA" that make someone believing that the appraisers are doing their job to appraise the property fairly. To make a fair appraisal, the appraiser should not know how much the property is being offered. In theory, the lender is not allowed to select the appraiser and it is selected ramdonly from the appraiser pool. But, for whatever reason, the appraisers manipulated the number to match the purchase price in may cases I have seen.
I agree. The true appraisal is one you pay for out of your pocket with no purchase/sale/bank involved.
Most of the appraisals were not a true appraisal. For a true appraisal, the appraiser should not know the purchase price. They should privde the appraisal value after comparing the property with others without know how much the offer is. But, most of the appraisers try to appraise the property value to the offering price these days. My friend just purchased a property for $408K and the appraisal value is also exactly $408K. It is a joke with such an "appraisal".
Not a "true appraisal"????
You do know that it is REQUIRED that an appraiser attempt to find out by any and all means necessary, the pending contract price of any real estate being appraised, right?. And that this is the law - everywhere in the U.S. To understand why, you'd need to know about how things like the S&L crisis came about in the late '80s to mid '90s.
But it's the law. If the appraiser does not report it in the appraisal and analyze it, that sends up a big red flag to the lender and regulators.
When listing homes, our sellers don't ever see that letter until they've chosen the best offer. Then I tell them I have a bunch of letters intended to pull their heart strings and ask if they want to be exposed to those. Some do, most don't. Few change their mind after first unemotionally selecting an offer. But it's a good strategy nonetheless from a buyer standpoint, and I think every buyer should do it. But as a seller, do you want to subsidize your buyer's purchase because you "feel good" about them?
That's actually not true. It's counter intuitive, but by listing a home at the "sweet spot", you draw more offers, creating more competition, and end up with a higher contract price than if it had been listed higher to start with. For example, I might say to a seller when setting list price "I can get over $300K but only if we price it under $300K". Then I have to spend time explaining what that means and why it is.
But homes that draw 10+ offers and sell $30K over list would not have sold for that much if they had been listed $20K higher to start with. I know it sound weird.
Steve
There were 3 offers on the table when I sold my home.
I went with the highest offer with the most downpayment.
There was a letter with one offer and my agent asked if I wanted to see it.
I said no. Buying/selling a home is a financial transaction, not an emotional one and certainly not a humanitarian goodwill one.
But there are some that are emotionally attached to their home and only want to sell to others who will "love the home as much as they did".
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