Appraised value, compared to market value?

The market might want to pay more for a home, but when there is financing involved, it’s rare that a buyer will want to pay over the appraised value. When the contract sales price and appraised value, no matter how exceptional or nice the home is, there is less confidence about the purchase, and when it’s a substantial, rarely will the contract close.

If the home is in an area that tends to have a lot of first-time, FHA or VA buyers for example, and there are concessions being given by sellers, such as closing costs, the appraised value might come in less.

It’s extremly important to have a seasoned Realtor represent you! Concessions are not viewed as the true sales price of a property, so the appraiser will discount them when determining the real price. In many neighborhoods where this happens, the values want to increase, but appraisals often hold prices back a bit, simply due to the dynamics of most buyers in the neighborhood needing financing that requires an appraisal.

6. What if the appraisal comes in less than the contract sales price?

Besides a difficult inspection, this is one of the most stomach-dropping moments in a real estate transaction. Everything seems to be sailing along just fine until boom, the lender shares the bad news that the appraisal came in less.

The buyers might not have the additional funds to come out of pocket or might not want to. When this happens, the buyer’s agent will typically share the appraisal report with the listing agent (unless prohibited by law, etc.), so they can see and understand the shortfall and how the appraiser arrived there. I have experienced different appraisers come in with substantially different values. This becomes a different challenge, and discussed in another blog.

The seller and listing agent can appeal the appraisal, but don’t expect much to happen there. The buyers lender is steadfast and in todays market it’s extremley for lender to sway from the original appraisal. The process can take several weeks with no guaranteed outcome, leaving the sale in limbo and everyone’s plans on hold.

Unfortunately, time and money does not wait. The listing agent can pour over the report like a forensic accountant backward and forward looking for discrepancies, errors and bad information as well as submit comparable sales they feel should be considered. I’ve never seen an Appraiser accept this data.

Typically, the appraiser will refute the data submitted. Although minor tweaks could be made, it’s usually not enough to pull the value up. As a result of today’s lending guidelines, the lender can rarely, if ever, throw out the appraisal and order a new one.

The buyer and seller can elect to renegotiate the price, which could also put all the other terms in the contract up for grabs. This means that any closing costs, items the sellers were willing to leave as well as the closing date could be up for discussion.

If the seller has to come off their price by a certain amount, they might not be willing to do as much or want to close sooner or later in exchange for the hassle.

Worst case, both parties can walk away. YES it can happens. Sometimes an appraiser brings the value in so low that the damage is irreparable. I’ve experienced deals where the appraiser might not be familiar with the area or have experience with the kind of home being appraised (unique, higher-end, waterfront, niche property, etc.), and may have driven 60 miles to do the evaluation. which hurts everyone involved in the transaction.

Determining value is a specialized skill that is built over years of working with properties in a variety of neighborhoods and truly knowing and understanding the fabric of those communities inside and out. Florida Appraisers must have a bachlors degree now and because there was so many ethical vialations from 2004 thru 2012 the state has revoked many licenses and appraisers determination if final.

Knowing every home, floor plan, how the homes were constructed, who the builders were, lot sizes, views, etc., is not something that can be gleaned from data on a MLS sheet.





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The market might want to pay more for a home, but when there is financing
involved, it’s rare that a buyer will want to pay over the appraised
value
. When the contract sales price and appraised value, no matter
how exceptional or nice the home is, there is less confidence about the
purchase
, and when it’s a substantial, rarely will the
contract close.

If the home is in an area that tends to have a lot of first-time, FHA
or VA buyers for example, and there are concessions being given by
sellers, such as closing costs, the appraised value might come in less.

It’s extremly important to have a seasoned Realtor represent you! Concessions
are not viewed as the true sales price of a property,
so the appraiser
will discount them when determining the real price. In many neighborhoods where
this happens, the values want to increase, but appraisals
often hold prices back a bit, simply due to the dynamics of most buyers in the
neighborhood needing financing that requires an appraisal.

6. What if the appraisal comes in less than the contract sales
price?

Besides a difficult inspection, this is one of the most stomach-dropping
moments in a real estate transaction. Everything seems to be sailing along just
fine until boom, the lender shares the bad news that the appraisal came in
less.

The buyers might not have the additional funds to come out of pocket or
might not want to. When this happens, the buyer’s agent will typically share
the appraisal report with the listing agent (unless prohibited by law, etc.),
so they can see and understand the shortfall and how the appraiser arrived
there. I have experienced different appraisers come in with substantially
different values. This becomes a different challenge and discussed in another
blog.

The seller and listing agent can appeal the appraisal, but don’t expect much
to happen there. The buyers lender is steadfast and in today’s market it’s extremely
for lender to sway from the original appraisal. The process can take several
weeks with no guaranteed outcome, leaving the sale in limbo and everyone’s
plans on hold.

Unfortunately, time and money does not wait. The listing agent can pour over
the report like a forensic accountant backward and forward looking for
discrepancies, errors and bad information as well as submit comparable sales
they feel should be considered. I’ve never seen an Appraiser accept this data.

Typically, the appraiser will refute the data submitted. Although minor
tweaks could be made, it’s usually not enough to pull the value up. As a result
of today’s lending guidelines, the lender can rarely, if ever, throw out the
appraisal and order a new one.

The buyer and seller can elect to renegotiate the price, which could also
put all the other terms in the contract up for grabs. This means that any
closing costs, items the sellers were willing to leave as well as the closing
date could be up for discussion.

If the seller has to come off their price by a certain amount, they might
not be willing to do as much or want to close sooner or later in exchange for
the hassle.

Worst case, both parties can walk away. YES it can happens. Sometimes an
appraiser brings the value in so low that the damage is irreparable. I’ve
experienced deals where the appraiser might not be familiar with the area or
have experience with the kind of home being appraised (unique, higher-end,
waterfront, niche property, etc.), and may have driven 60 miles to do the
evaluation. which hurts everyone involved in the transaction.

Determining value is a specialized skill that is built over years of working
with properties in a variety of neighborhoods and truly knowing and
understanding the fabric of those communities inside and out. Florida
Appraisers must have a bachelor’s degree now and because there were so many
ethical violations from 2004 thru 2012 the state has revoked many licenses and appraiser’s
determination if final.

Knowing every home, floor plan, how the homes were constructed, who the
builders were, lot sizes, views, etc., is not something that can be gleaned
from data on a Multiple Listing Service sheet.

 


Knowing every home, floor plan, how the homes were constructed, who the builders were, lot sizes, views, etc., is not something that can be gleaned from data on a MLS sheet.

Author: danswingblog

Dan has celebrated over 19 years as a full-time Realtor. Successfully listed and sold Luxury homes, diversified real estate portfolios, Advises and assists clients with challenging liquidations and purchases. Not uncommon to be working with foreign nationals, buyers that leverage the Sterling, Euro, and similar currency. Dan welcomes the Global community, with friends in many Nations. He brings a reputation for Integrity, Expertise, and Focus. Our customers deserve the best. Currently provides Residential and Commercial B.P.O.'s, Broker Price Opinions, B.O.V's, Broker Opinion of Value to many lenders. Manage and Sells R.E.O., Real Estate Owned properties, distressed properties! Evaluate and negotiate solutions for sellers and lenders. Developed, operated and sold a Florida "AWARD WINNING" Ad Agency! 2010 & 11 Commercial Agent of the year. RE/MAX Paramount Properties. Relocated to Tampa in 2012, enjoyed retirement for 6 months. Saw unethical practices by some Realtors and choose to reverberate our profession in the Tampa area. In four years built his business to as many as four (4) transactions monthly. Mortgage brokers were calling Dan a Superstar in Real Estate. Dan and his wife relocated to North East Florida, to the community of Nocatee. Currently focusing on 55 and older communities and Luxury Real Estate. Successfully closed on many extremely challenging foreclosures, and Short Sale. Coached and participated in Commercial and Multi-Income Family REO's in the past six years. Elected to the Auburndale City Commission in 1986-88. Created and served as 1st Redevelopment Chair in 1988 & 89 personally put in place all the elements for the Auburndale CRA. 1990 City Commission refused to give a full vote of confidence. After a 5 year journey to personally raise funding, extensive research and study for the CRA district perimeters, and stunned with the Commissions doubt. Positioned himself to run for office again, was re-elected to Auburndale Commission, to serve 1991-93 to full fill the CRA master plan! Active with the Central Florida Development Council from conception in 1985 and sat on the board periodically for the past 25 years representing municipalities and private investors. The positions Dan held from 1986 through 1993 enabled him to have a complete workable understanding of the State of Florida Comprehensive Plan for Future Land Use, and the benefits of intergovernmental agreements, utility franchise expansions, and public/private partnerships! Specialties: Assets recovery & receivership, Real Estate Portfolio's, REO & Short Sale of Residential and Commercial negotiations, marketing consultant, public relations, and Broker Price Opinions for residential and commercial lenders.

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