Archive for the 'Appraisals' Category

13 Sep
Appraisal Values – A Common Challenge
Posted On : 09 13th, 2011   By : Alice  |  Appraisals, Real Estate

Home CalculationAs many of you know, it is currently a very challenging market to sell your home in. There is a lot of competition listed on the market and many properties (including foreclosure and short sales) that are priced aggressively to sell. The main challenge that I discuss with many of my sellers is not whether or not we will be able to get a buyer to purchase their home, but more importantly, if the property will appraise out to the purchase price.

Oftentimes, as a listing agent, I am actually able to get slightly higher price for my seller, but then the appraisal comes back short. For example, I had a luxury townhome listing that I put on the market earlier this year. When I originally met with the seller, I had suggested that we list at $399k, based on other properties that had closed within the past 3-6 months. I also discussed with the seller that we would probably not receive an offer higher than $360k-$370k range. The seller wanted to list the home at $429k. We made a couple of price reductions, and had an offer within 90 days. However, when the appraisal was conducted, the value came back at $346k. Even though I was able to obtain a sales price of close to $400k, the appraisal came back over $50k short!

The appraiser had looked at all closed comparables in the subdivision, and the most recent closed comparable was below $300k. As a listing agent, I am always present at all appraisals. For this particular one, I had presented to the appraiser information regarding the difference in square footage between the two properties, the location difference (the property that closed at below $300k faced a laundry cleaner), and even provided the appraiser with information directly from the original builder to prove that the subject property was worth a lot more than $346k. However, even after all of this information, the appraiser would not budge on value.

Ultimately, my client had a difficult decision to make: to take the offer of $346k, or to cancel the contract and wait for the market to change (which according to economists, will take at least 3-4 years).

This example is the classic case of the parameters we must work within, in today’s real estate market. Appraisers will only include properties within a 2 mile radius of the home, and only look at closed comparables within the past 3-6 months. Therefore, even if you are a seller who is lucky enough to receive an attractive offer price for your home, it may not appraise out.

The lesson from all of this is very clear- if you are going to sell your home in this market, price it right and aggressively from the first day. Most importantly, whether we like it or not, we must price it based on other homes that have closed within your subdivision or sub-market area within the past 3-6 months.