Question about appraisals

dabunchNovember 10, 2008

House listed for 464K.

Sold for 450k.

Appraisal came in at 430K.

Realtor fees 5%- 22.5k

Which is the real value of the house? Is it with the realtor's fee, or is it minus the agents fee?

Which number is the bank looking for?


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My the appraisers are being conservative, or as Howie Carr would say, it's worth what the markets' bearin'. My own deals are appraising out very close to the sales price, always a tick higher however. I'm betting the bank will go with appraised value, this will be interesting you'll need to wait until Wednesday for that answer.

    Bookmark   November 10, 2008 at 6:09PM
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Hi Dabunch,
The bank will lend a percentage of the lower of the contract or appraised value.

As to what the "real" value is... you'll have to define "real" for us ;~)

Free market "economic real value" is whatever the buyer & seller non-fraudulently agree to.

"Relative-Comparative real value" is the price it fits up to, within some discretionary wiggle room, among roughly similar homes sold within a certain radius, within a relatively recent period of time.

Dave Donhoff
Leverage Planner

    Bookmark   November 10, 2008 at 6:13PM
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What you need to do is find out why the appraisal came in lower than your agreed price. When I bought this house, the mortgage company got an appraiser from another town. She didn't understand that the other part of town had lower house prices and took the comps from there. Once my realtor explained the price/geographic difference, she took her comps from closer to my house and came in $5K over the contract price.

So get a hold of the appraisal and find out what went wrong. It could be that you over paid.

    Bookmark   November 11, 2008 at 8:36AM
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Clemrick - your story makes me wonder about appraisals and appraisers.

    Bookmark   November 11, 2008 at 8:40AM
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The bank (and most buyers) will look at the appraised value and appraisers are being VERY conservative right now.

I looked at over 100 houses in the same area and came away with a very good idea of the local prices - both asking and selling. So when we put an offer on our 1st choice in September I was confident that it was a fair and reasonable offer. Not so, said the appraiser. Not so said our lender. Appraisal came in $9,000 lower than our offer! Buyer would not budge on price even when we offered to split the difference, appraiser would not budge on his value, and we were not willing to pay our 20% down PLUS the extra $9k. So off to find another house -

2nd house we decided to make a low offer, in early October - still the appraisal (using another appraiser this time) came in only $100 over our offer.

The 'declining market value' is what made the appraisals so low - this is the % the appraiser feels the market is declining and deducts from the value of the homes already sold. ie: comparable homes sold for $100,000 but market is declining by 5%, so this house you want to buy for $100k is only worth $95k. If you ask me, it's a pretty random % based upon 'gut feeling' (aka the appraisers 'valuable experience'). Right now banks want to take no chances when it comes their collateral.

Btw, that 1st house is still on the market - over 4 months now. That low appraisal and their unwillingness to budge on price is preventing a sale. They will never get an offer higher than ours ($4,500 over appraisal), at least not until the housing markets stabilize and begin growing again.

(Btw, one of the comps used in the 1st appraisal was a home I'd looked at, same sqf, same number of bedrooms, etc. except that it was not updated and was real UGLY. Didn't matter to the appraiser that the house being appraised was completely and beautifully remodeled - he still compared it to this butt ugly house that had random pieces of tile everywhere, including the kitchen and bathroom ceilings!).

    Bookmark   November 11, 2008 at 5:55PM
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Seems like a lot of confusing answers to a very simple question.

The banks base the appraisal on the sales price, which INCLUDES the realtor fee.

    Bookmark   November 11, 2008 at 7:27PM
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Here's what just happened to me. We are planning to sell in the Spring and applied for Home Equity Loan to do some needed work on the house. Applied to Chase. They send their appraiser who comes to the house. Decides to appraise my house for $300,000 less than the Town assessment. When I asked why such a large difference, he said my land was hilly and would hurt the sale of the house. People with children want level property. The area where I live is close to NYC and hilly. This guy came from Long Island (I later found out) which is flat.

I then called our town and demanded a new assessment due to the Banks assessment. They sent a assessor who decided to lower our assessment by almost $2,000 because of market conditions. He stated that he disagreed with the Bank appraiser and stated 'this guy doesn't know this area.'

At least my taxes will go down in 2010...when we don't live here anymore.


    Bookmark   November 11, 2008 at 11:10PM
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I guess I should clarify. The bank is really only concerned that the house appraises for the mortgaged amount. (loan amount) The buyer wants the house to appraise for the sales amount.

    Bookmark   November 12, 2008 at 7:13AM
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appraisers will only verify sales price or lower.
buy a trillion dollar house for $50k and the appraiser will come in at $51k. offer $500k and you will get $501k.
The argument is that the market is bearing the offered value, so that is what it is worth.
Once you buy the house you can wait 6 months get a separate appraisal to see your actual worth (for PMI purposes, etc.)

instead of being called appraisers, they should be called "value concurers"

    Bookmark   December 9, 2008 at 9:47AM
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simple answer is very likely the bank will use the appraised value instead of sale price. the appraised value tells the bank what the market supports as of the day the appraisal was made.

so either you or the seller will have to come to an agreement to lower the price to 430k either by increased down payment or lower price or both. what is the sellers down payment? if it is more thank $20k it probably does not matter. if they are looking at 90-100% financing the bank may put a stop to it.

good luck.

    Bookmark   December 9, 2008 at 12:14PM
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hkstallion, I totally agree with you.

Seems like the appraisers know the answer before they even start. In our area they add 5k to the sale price and make the buyer feel like they did ok.

    Bookmark   December 9, 2008 at 8:31PM
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