Did you ever write a blog post and have it dissapear? It happened to me, and I had to start all over again. I would rather just say that my dog ate it and get on with my day, and write about appraisals.
Appraisals are part of the lending process and they have tightened up a bit. In 2004 and 2005 it seemed like homes appraised for whatever amount the buyer wanted to pay. No longer the case. Sellers can set a price, and buyers can make an offer but the bank will only finance the appraised amount and it might be lower than the agreed upon purchase price.
The bank will only lend the amount of money that the home is appraised for, that means that buyers either have to find some exptra money, or sellers need to accept a lower offer. In most cases if a home appraisal comes in low the buyer can cancel the purchase agreement and get their earnest money back.
It is hard to imagine that in today’s market that a home that is overpriced would get an offer but they do. It is even harder to beleive that they would receive offers that are above market value but they do. I think it is a good thing that appraisers are being a little more conservative than they have been in the past.
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I choose to look it is as “the dog ate the other agent’s common sense”. Why drop a dime to market a home that is over value and wouldn’t appraise? I just completed negotiating an offer on a home that didn’t stand a chance appraising. We’re working on offer number two, on a property that will appraise.
Teresa,
Thanks for the post! I also thank you for the support! Good old fashion common sense.
It is well known that appraisers get their own share of heat for being “conservative”. I can think of many occasions where when greeting a homeowner at the door they would ask if I was the assessor with my reply being no I was the appraiser and that people liked appraisers half the time.
The issue of real estate sales professionals and home buyers/sellers using an appraisal for listing or purchase, while not always received, was in fact a key reason for the development of company. Special appraisal products are offered to those parties in efforts to speed up the transaction and counter other issues that may arise from a sale/purchase.
Thanks for the item, as always I enjoyed it immensely.
As a buyer I always appreciate a more conservative appraisal. We’ve had to avoid offers on a number of homes that would never appraise near the asking price. I am curious what the inventories would actually be if you removed all these “wishers and dreamers” from the MLS.
Many buyers are quite shocked to realize that the financing process also scrutinizes the property, not just the buyer’s ability to qualify. I suspect that in my cooling Toronto real estate market more offers should specifically address what happens if the property doesn’t appraise.
As if our market isn’t challenging enough, now we have problems getting appraisals! The valuation process will start sinking into the heads of the sellers when the appraiser’s put their pen to the paper! Seldom will a buyer pay more for a home than the appraiser claims it’s worth.
What many sellers don’t realize, once their is an FHA appraisal on their home, that value sticks for 6 months! If the market is declining, they best reduce the price and move on now! If they don’t have to move, they need to sit tight.
This too shall pass.
kk
P.S. How come you never send me flowers anymore? I like that one up above…
I am going through this same scenerio right now with a house I would like to purchase. What baffles me even more is that there are three other homes in the same developement for sale and they are all listed for higher than the one we wish to buy.
AR – wast they are listed for and what they appraise for are totally unrelated. if it is a new development they may just have them priced too high, if these are re-sale units in a new development chances are the sellers still owe more on them than they are worth so are pricing them in such a way that they don’t have to bring money to the closing.