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I asked the same question last year here. The answer is the appraisers know the purchase price before coming up with the appraised value. It sounds silly but that is the way it is.
If they don't know the price, they will ask the listing agent for a copy of the contract and a copy of the survey when the agent meets the appraiser at the house. I find this ludicrous, but that is the way it is done in most areas.
The appraiser is required by FNMA to analyse the contract.
The appraiser is also expected to be professional and a disinterested third party and not caring WHAT the contract price is.
Any appraiser allowing him/herself influenced by knowing the contract price in advance and who will appraise accordingly ought to be reported to their State Board and severely penalized.
I would have thought the appraiser would want to be "blind" when he came in, so that there is absolutely no bias one way or the other. For instance, if he comes up with $198k, and then sees the contract is for $200k, he could either say "nope, i'm sticking at $198k" to help the lending company out and be a butt about it , or say "eh i'll round it up" to help the buyer/seller be at that contract $.
As I mentioned before, I could not care less what the contract says.
In addition, appraising is not an exact science. Unfortunately, the FNMA forms don't allow us to use a range of values, say "between 195,000 and 205,000" like we do on narratives. It would be much more realistic.
All properties "appraise". And I don't quite understand how the listing agent's presence is relevant.
Well, I can only speak for NC since this is the area that I'm licensed in and have been selling real estate for quite a few years:
Back years ago when it was a bit more of a seller's market, if a neighborhood had houses that sold in only 5 days, each time another was listed, the listing agent would push the price up $2,000 or so.
At some point, the comps were lower and it was difficult for an appraiser that didn't know the area to understand how the house could be valued at that new price. So, the listing agent would meet the appraiser at the house to discuss it and prove that the price was the correct market value.
We asked our realtor this same question because we are paying the builder for upgrades out of pocket - separate from the contract, and don't want those upgrades included in the appraisal! Our realtor said that in cases such as ours where we are making a large down payment, that the appraisers will often do 'drive by' appraisals and they never even see the inside of the house!!!
Well, I can only speak for NC since this is the area that I'm licensed in and have been selling real estate for quite a few years:
Back years ago when it was a bit more of a seller's market, if a neighborhood had houses that sold in only 5 days, each time another was listed, the listing agent would push the price up $2,000 or so.
At some point, the comps were lower and it was difficult for an appraiser that didn't know the area to understand how the house could be valued at that new price. So, the listing agent would meet the appraiser at the house to discuss it and prove that the price was the correct market value.
Vicki
In that case the appraiser was obviously not geographically competent and should have declined the assignment.
We asked our realtor this same question because we are paying the builder for upgrades out of pocket - separate from the contract, and don't want those upgrades included in the appraisal! Our realtor said that in cases such as ours where we are making a large down payment, that the appraisers will often do 'drive by' appraisals and they never even see the inside of the house!!!
Which in turn leads to an unrealiable appraisal.
Why on earth would you not want the upgrades to be included in the appraisal?
I don't understand it myself. Our house appraised at exactly what we purchased it for, we had gotten it for a great deal as a short sale.
The problem is, we bought a 2599 sq ft house; she decided to knock it down to 1711 sq ft (took out the finished walk-out basement out of the equation), so that at the average sq. footage of the comps, it was at exactly the price we paid.
Now you know, and I know, if she had done the correct sq. ftage, it would've appraised A LOT higher. Why is it a big deal (especially as a short sale) to appraise well above purchase value?
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