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Old 07-05-2020, 02:17 PM
 
3,848 posts, read 1,897,568 times
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I was told by a friend that if you pay above the appraised value you are paying a premium and throwing away money higher than the homes value to get it, so it is not a good idea. My issue with this is that every home has multiple offers above asking price today, so can't one assume that most homes are coming in above appraised value today?

Also, the value of something is what someone is willing to pay in a marketplace. The appraised value is just something one person comes up with. Its an estimate and the true value is what someone is willing to pay. LIke I tried to sell a car for the Bluebook value once and no one would buy it, so I had to lower the price. The "appraisal" was not correct and the true value was what someone was willing to pay.

Last edited by Berteau; 07-05-2020 at 02:27 PM..
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Old 07-05-2020, 02:48 PM
 
Location: In a George Strait Song
7,813 posts, read 5,240,987 times
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You are right in principle that the value of something is what someone is willing to pay for it. That is Econ 101.

In real estate, it works differently. A bank will not loan greater than the appraised value of a home. If you offer $500,000 on a home and it only appraises for $450,000, YOU have to make up the $50,000 difference, unless the seller is willing to lower the price to the appraised value. This is why many contracts have the stipulation that "house must appraise."

Also saying an appraisal is one person's opinion is an over simplification. Appraisals are based on nearby homes that have sold recently. Condition, size, upgrades, views, and so forth can all impact the value of a home.

I wouldn't necessarily assume that the houses selling for over asking are also appraising at that price. Maybe, if the home was priced low in an effort to generate a bidding war, but maybe not.
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Old 07-05-2020, 02:59 PM
 
Location: NC
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Calgirlinnc I’m not sure your numbers are right. If you pay 500k you probably have a 100k down payment. So you borrow 400. If the lender will put out up to 450 then you are within the specs. But if you only have 3% down you would need to worry about the 35k not covered.
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Old 07-05-2020, 03:13 PM
 
Location: In a George Strait Song
7,813 posts, read 5,240,987 times
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Quote:
Originally Posted by luv4horses View Post
Calgirlinnc I’m not sure your numbers are right. If you pay 500k you probably have a 100k down payment. So you borrow 400. If the lender will put out up to 450 then you are within the specs. But if you only have 3% down you would need to worry about the 35k not covered.
It depends on the LTV of your contract. The bank is lending based on the ratio of the loaned amount to the purchase price. They don't just offer you more money.

ETA: also if someone buys a home for $500K that appraises for $450K, a lender will not loan $450 on it. They would be loaning 100% of the home's value, and AFAIK that is not done now.

Last edited by calgirlinnc; 07-05-2020 at 04:08 PM..
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Old 07-05-2020, 03:15 PM
 
Location: Cary, NC
39,008 posts, read 67,577,975 times
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Quote:
Originally Posted by Berteau View Post
I was told by a friend that if you pay above the appraised value you are paying a premium and throwing away money higher than the homes value to get it, so it is not a good idea. My issue with this is that every home has multiple offers above asking price today, so can't one assume that most homes are coming in above appraised value today?

Also, the value of something is what someone is willing to pay in a marketplace. The appraised value is just something one person comes up with. Its an estimate and the true value is what someone is willing to pay. LIke I tried to sell a car for the Bluebook value once and no one would buy it, so I had to lower the price. The "appraisal" was not correct and the true value was what someone was willing to pay.
Don't confuse "List price" with "Market Value" or "Appraisal Opinion."

They are independent of each other.
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Old 07-05-2020, 07:52 PM
 
1,174 posts, read 1,203,489 times
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If you're in solid financial shape and have 20% down, give the market another 6 months. When the mortgage forbearance and unemployment checks stop, you're going to see houses come up on the market.

Listen to an appraiser who has no skin in the game when it comes to a fair price. Never trust a real estate agent that has skin in the game. This can be your own agent, the seller's agent, or anyone who is an agent in the area. They have a 6% reason to get you to pay as much as possible.

There is a reason banks trust the word of an appraiser over that of a real estate agent.

And yes, if a house goes into a bidding war, and you pay over the appraisal, you're the bigger fool. What one fool is willing to pay does not dictate "true value", it dictates what one idiot was willing to pay at that point in time, probably spurred by emotion.

Leave emotion out of it. If someone else wants to pay more than it is worth, let them. There are other houses out there to buy.
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Old 07-05-2020, 09:09 PM
 
544 posts, read 527,770 times
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Quote:
Originally Posted by Berteau View Post
I was told by a friend that if you pay above the appraised value you are paying a premium and throwing away money higher than the homes value to get it, so it is not a good idea. My issue with this is that every home has multiple offers above asking price today, so can't one assume that most homes are coming in above appraised value today?

Also, the value of something is what someone is willing to pay in a marketplace. The appraised value is just something one person comes up with. Its an estimate and the true value is what someone is willing to pay. LIke I tried to sell a car for the Bluebook value once and no one would buy it, so I had to lower the price. The "appraisal" was not correct and the true value was what someone was willing to pay.
The key word being "pay". People bidding with the assumption that someone else will pay (the bank) is not the same. It goes back to the old "Your price, My terms".
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Old 07-06-2020, 08:24 AM
 
Location: OH->FL->NJ
14,830 posts, read 10,494,560 times
Reputation: 7301
Quote:
Originally Posted by Lockdev View Post
If you're in solid financial shape and have 20% down, give the market another 6 months. When the mortgage forbearance and unemployment checks stop, you're going to see houses come up on the market.

Listen to an appraiser who has no skin in the game when it comes to a fair price. Never trust a real estate agent that has skin in the game. This can be your own agent, the seller's agent, or anyone who is an agent in the area. They have a 6% reason to get you to pay as much as possible.

There is a reason banks trust the word of an appraiser over that of a real estate agent.

And yes, if a house goes into a bidding war, and you pay over the appraisal, you're the bigger fool. What one fool is willing to pay does not dictate "true value", it dictates what one idiot was willing to pay at that point in time, probably spurred by emotion.

Leave emotion out of it. If someone else wants to pay more than it is worth, let them. There are other houses out there to buy.
This. NO ONE knows how many of the lost jobs will come back. All media is opinionated to one side or the other so take them all with a grain of salt.

The only thing I am certain of is that the unemployment 1 year from now will be higher than Feb of 2020. If possible wait it out in most areas of the country.
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Old 07-06-2020, 08:39 AM
 
Location: East of Seattle since 1992, originally from SF Bay Area
36,343 posts, read 66,135,624 times
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With such demand and shortage of homes on the market, there are still people coming in with all cash offers, so the appraised value is meaningless. We just had another house sell a few blocks away in the $700k range in just 3 days.
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Old 07-06-2020, 09:33 AM
 
3,848 posts, read 1,897,568 times
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Quote:
Originally Posted by Hemlock140 View Post
With such demand and shortage of homes on the market, there are still people coming in with all cash offers, so the appraised value is meaningless. We just had another house sell a few blocks away in the $700k range in just 3 days.
THis is what I'm worried about. All these homes will be sold above appraised value due to cash offers or mostly cash offers. This will push up appraised values of home sold in the future due to comps.
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