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Old 09-04-2019, 11:14 AM
 
Location: Columbia SC
9,245 posts, read 7,990,409 times
Reputation: 12782

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Quote:
Originally Posted by Scooby Snacks View Post
My sister and I got into a minor spat regarding the home she has a contract on. She recently put a contract on her first home. I'm very happy she's buying a home, am thrilled for her and her family, but when she asked me for my opinion, I made the mistake of telling her the house was overpriced and she got angry and accused me of being negative and incorrect. Maybe I'm wrong and the RE gurus here can clear it up for me.

The home is in Texas, a standard 3/2/2, built in 2014, with no add-ons but a couple of upgrades (flooring.) The home assessed last year by the tax district for $350,000. The seller originally priced it at $390K but within a month dropped the price to $375K, where it now stands. In my view, this means the house is currently $25K overpriced unless the appraiser shows the home's value increased $25K in the last year. If the new appraisal she gets says the home is still worth only $350K, either the seller has to drop the price or she has to bring the extra money to the table because the bank won't lend more than the home is worth (or both.) Am I correct? I'm not trying to be a know-it-all with my sister. I just suspect her RE agent may not have her best interests in mind based on some of her behaviors in the home buying process. Thanks.
Open mouth. Insert foot. Shut mouth.
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Old 09-04-2019, 11:16 AM
 
Location: Raleigh NC
9,856 posts, read 7,456,301 times
Reputation: 8511
Add in, what happens when a home doesn't appraise > contract price is determined by the language of the contract in the given state.
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Old 09-04-2019, 12:07 PM
 
8,083 posts, read 9,896,780 times
Reputation: 14394
Quote:
Originally Posted by johngolf View Post
Open mouth. Insert foot. Shut mouth.

This. You had little actual knowledge of a subject and decided to insult your sister's intelligence by saying she was making a poor decision. Why would you do that?
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Old 09-04-2019, 12:16 PM
 
6,882 posts, read 8,232,746 times
Reputation: 12013
For all we know, the property could be overpriced. But no one can determine that by solely looking at the tax assessment level.

Maybe your sister got a great deal.
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Old 09-04-2019, 12:30 PM
 
9,056 posts, read 8,261,322 times
Reputation: 19688
The true value of a property, is what the appraiser says it is worth for the following reasons,

1....The mortgage company will not fund a loan, if the sale price is above the appraised value. The mortgage company, does not want the loan more than 80% of the appraised value.

This is the reason a lot of home sales fall apart and do not close, with the buyer getting their earnest money back.

If the buyer really wants the home even if they know the sale price was $50,000 over the appraisal, and they have a bunch of money sitting around, they can buy the amount of the sale (pay in cash) above the appraised value, plus 20% of the balance and still close. This is not the normal thing that happens.

If the seller is wise, they with the cooperation of the buyer, adjust the price to the appraised value, and close. This often happens.

If the seller insists that the that they will not adjust to the the appraised price, the sale is voided, and the buyer gets their deposit back.

The tax value of the property, is not the value of the value of the property. The county sets their budget, and to raise the money needed, they will adjust the value of the properties so they will raise the revenue to fund their budget through property taxes.

Over the years, I have seen tax values set by the county, to be well below the market value, and other times they will be considerably above the market value. It depends on how much money the city and county need to raise, not the market value of the home.

Example: Our home had the assessed value raised by 15% this spring, but the actual value only increased by about 10%. The county did not want to raise tax rate which makes people angry, so they raised our assessed values. Good news, is the assessed value is still considerably below the true market value.
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Old 09-04-2019, 12:36 PM
 
6,882 posts, read 8,232,746 times
Reputation: 12013
Quote:
Originally Posted by oldtrader View Post
The true value of a property, is what the appraiser says it is worth for the following reasons,

1....The mortgage company will not fund a loan, if the sale price is above the appraised value. The mortgage company, does not want the loan more than 80% of the appraised value.

This is the reason a lot of home sales fall apart and do not close, with the buyer getting their earnest money back.

If the buyer really wants the home even if they know the sale price was $50,000 over the appraisal, and they have a bunch of money sitting around, they can buy the amount of the sale (pay in cash) above the appraised value, plus 20% of the balance and still close. This is not the normal thing that happens.

If the seller is wise, they with the cooperation of the buyer, adjust the price to the appraised value, and close. This often happens.

If the seller insists that the that they will not adjust to the the appraised price, the sale is voided, and the buyer gets their deposit back.

The tax value of the property, is not the value of the value of the property. The county sets their budget, and to raise the money needed, they will adjust the value of the properties so they will raise the revenue to fund their budget through property taxes.

Over the years, I have seen tax values set by the county, to be well below the market value, and other times they will be considerably above the market value. It depends on how much money the city and county need to raise, not the market value of the home.

Example: Our home had the assessed value raised by 15% this spring, but the actual value only increased by about 10%. The county did not want to raise tax rate which makes people angry, so they raised our assessed values. Good news, is the assessed value is still considerably below the true market value.
Of course, that is not how it happens everywhere. Tax assessment practices are very different in Michigan and I'm sure that is true in many other areas as well.
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Old 09-04-2019, 01:23 PM
 
Location: Moku Nui, Hawaii
9,839 posts, read 19,090,870 times
Reputation: 8777
Quote:
Originally Posted by Scooby Snacks View Post
My sister and I got into a minor spat regarding the home she has a contract on. She recently put a contract on her first home. I'm very happy she's buying a home, am thrilled for her and her family, but when she asked me for my opinion, I made the mistake of telling her the house was overpriced and she got angry and accused me of being negative and incorrect. Maybe I'm wrong and the RE gurus here can clear it up for me.

The home is in Texas, a standard 3/2/2, built in 2014, with no add-ons but a couple of upgrades (flooring.) The home assessed last year by the tax district for $350,000. The seller originally priced it at $390K but within a month dropped the price to $375K, where it now stands. In my view, this means the house is currently $25K overpriced unless the appraiser shows the home's value increased $25K in the last year. If the new appraisal she gets says the home is still worth only $350K, either the seller has to drop the price or she has to bring the extra money to the table because the bank won't lend more than the home is worth (or both.) Am I correct? I'm not trying to be a know-it-all with my sister. I just suspect her RE agent may not have her best interests in mind based on some of her behaviors in the home buying process. Thanks.

Frequently when a house is first listed, the asking price will sort of be a 'fishing' price. They're just trolling to see if anyone will bite. Which is why the price was higher for the first month. They then dropped it down to what is probably a more reasonable rate.

Tax assessments have nothing to do with sales prices. We have a house that if we put it up for sale for the assessed tax value it would be sold before we even finished thinking about it. Last month we bought a house for $40K under it's assessed tax value and I think we still paid more than we should have for it. Those two houses are within a mile of each other so it's all the same tax office. It sat on the market for almost a year with the price dropping about every month. Even though I think we overpaid, it turns out had we not gotten it under contract when we did, someone else was planning to put in an offer so it had apparently reached the sales price. Which, IMHO, has very little to do with it's actual value but the property is really nice even though the house is a disaster.

Buying and selling a house can be a rather stressful thing, especially if it's the first time you're doing it. There's quite a bit to learn and each transaction is going to be different so there's no set cheat sheet to use, either. So, your sister is most likely gonna be a bit stressed at this time, be kind to her and then hopefully she will return the favor when you're buying your house.

If the house your sister has picked will improve her life (location, location, location - everything else can be fixed) and she can afford it without strain and stress, then it's a good house. House mortgages are frequently for thirty years, so getting a mortgage that isn't stressful to live with is important.
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Old 09-04-2019, 03:19 PM
 
Location: Colorado Springs
107 posts, read 23,876 times
Reputation: 430
OP. When relatives ask for your opinion regarding something THEY HAVE ALREADY DONE, lie.
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Old 09-04-2019, 03:38 PM
 
Location: Austin
7,198 posts, read 17,984,274 times
Reputation: 9789
Quote:
Originally Posted by Scooby Snacks View Post

The home is in Texas, a standard 3/2/2, built in 2014, with no add-ons but a couple of upgrades (flooring.)
I'm still laughing at this... what's "standard"? And just saying Texas, you do know Texas is a large state, right? $350k in Dallas is different than $350k in Houston, which is way different than $350k in San Antonio. None of those $350k would be a comparable "standard" of home. Just sayin'...

And no, market value and sales prices means nothing compared to a tax assessment value.
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Old 09-04-2019, 03:42 PM
 
5,831 posts, read 1,470,815 times
Reputation: 4525
Quote:
Originally Posted by Scooby Snacks View Post
My sister and I got into a minor spat regarding the home she has a contract on. She recently put a contract on her first home. I'm very happy she's buying a home, am thrilled for her and her family, but when she asked me for my opinion, I made the mistake of telling her the house was overpriced and she got angry and accused me of being negative and incorrect. Maybe I'm wrong and the RE gurus here can clear it up for me.

The home is in Texas, a standard 3/2/2, built in 2014, with no add-ons but a couple of upgrades (flooring.) The home assessed last year by the tax district for $350,000. The seller originally priced it at $390K but within a month dropped the price to $375K, where it now stands. In my view, this means the house is currently $25K overpriced unless the appraiser shows the home's value increased $25K in the last year. If the new appraisal she gets says the home is still worth only $350K, either the seller has to drop the price or she has to bring the extra money to the table because the bank won't lend more than the home is worth (or both.) Am I correct? I'm not trying to be a know-it-all with my sister. I just suspect her RE agent may not have her best interests in mind based on some of her behaviors in the home buying process. Thanks.
So you are saying the house is worth $350 based on the tax assessment? You are wrong. Tax assessments are not reliable market value indicators. Tax assessors, like Zillow or Redfin, use software to value a lot of properties at once. They often don't know details but it is the most efficient way to value a lot of properties at once. They count on the homeowners to let them know if they are way over. If they are way under, it usually gets missed.
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