Home Buying in 91354>Question Details

Mystery, Home Buyer in 91354

Are comps the true predictor of an appraisal outcome?

Asked by Mystery, 91354 Thu Feb 18, 2010

Here's my situation. I placed an offer of 500K on a 2388 ft house and had my offer accepted on Feb 9th. After acceptance of the offer I noticed that the exact same floor plan that I am buying, closed for 485K. The house for 485K had an amazing view, and was on the end of a cul-de-sac. The house I'm in escrow on has only a peek-a-boo view, and is located on a through street. The lot of the house I'm in escrow on is larger than the one that closed for 485K.

My concern is the appraiser will see the house that sold for 485K, and now will not value my home more than that. The two homes have comparable upgrades (ie granite, stainless, tile floors). I'm worried that if the appraisal comes in at 485K or lower, the seller will no longer want to sell at that low price.

Does anyone have any insight for me?
TIA!

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Answers

19
You can get more than one appraisal, but keep in mind it will cost you. If all appraisal reports find that value is lower, either the seller needs to come down on price or you will be asked to make up the difference as your lender will not approve more than appraised value.

Good luck
0 votes Thank Flag Link Thu Jun 14, 2012
Hello, if the appraisal comes in lower it will benefit you because once you review the report you may want to ask the seller for a reduction in price even though the seller may not agree. The appraisal protects you from paying to much and for the bank to know if they should loan you x amount of dollars. If the appraisal comes in lower and the seller does not want to budge from the $500K accepted offer price then you need to decide if this property is the property for you.

Rhonda Holt
Weichert Realtors, H.P Greenfield
Cell: 646-725-5941
Email: HelpMeRhonda1919@yahoo.com
Web Reference: http://www.RhondaHolt.com
0 votes Thank Flag Link Sat Feb 27, 2010
Comps are the most important factor, however he is the simple answer. If the appraisal comes in lower and the Seller does not want to sell at the lower price, you still have the option if you can afford it to pay the difference and continue with the sale. If you're going to be there 5 years or longer, I would not worry about an extra $10k or so.

Hope that helps!
0 votes Thank Flag Link Sat Feb 27, 2010
I am assuming that you do not have a Buyer's Agents to represent you. If I am representing a Buyer & we are concerned about the appraisal supporting the loan amount, I will meet the appraiser at the home to point out everthing that has been redone in & outside of the home. Recent, quality upgrades can greaatly affect the appraised value of the home. Now, as a Realtor, I am not trying to affect the appraisal in any way, other than pointing out items to the appraiser. So, the appraisers are not bothered by my presence. And, I have been thanked for pointing out what uprades are new or nearly new.
0 votes Thank Flag Link Sat Feb 27, 2010
Comps are great indicator but one needs to look into some of the history of comparables to determine which were full value sales and which were not. For example (fictional example) a Quitclaim may reflect as a sale transfer for $1500 vs the market of $200k because of fees associated with recording the deed. Another factor in value discrepancy is not being privy to the details of sale transfer. Many reasons could play a part in a lower pricing such as negotiated reduction in price or wanted to unload property quickly. Then appraiser will make adjustments accordingly as the properties are compared and analyzed and they can't ignore an obvious match when researching comparables.
0 votes Thank Flag Link Sat Feb 27, 2010
Dear Mystery,

Yes, appraisals are based on comparable sales. It sounds like you are concerned that you might be paying too much for the $500k home. Is that correct?

Your realtor will probably be willing to provide you with her own market analysis and communicate with you and your lender about the value of the home you are buying. If your realtor can find comparable sales to support the value, so will the appraiser. If several recent sales support the $500k price on the home you are buying, the appraiser might not need to consider the one that sold for $485,000. That $485k home could be an anomaly among the other sales in the area and also might be underpriced.

If the appraisal does come in low, ask your lender how that will affect your loan. The outcome also depends on the language of your sale agreement. Review the sale agreement with your realtor. Ask her what your options are if your appraisal is low.
Web Reference: http://www.normawilson.com
0 votes Thank Flag Link Sat Feb 27, 2010
There are many factors that are reviewed in the appraisal process. They are going to review three recent sales on the report and make adjustments based on those transactions. Your agent should be able to provide three recent sales that compare to that home to give you a bit on insight. Once the appraisal is completed you will be able to review the options. It might come down to the decision of who will pay the difference between the appraised value and the contract price if appraises lower. You can add the additional amount in cash to the transaction at the closing or see if the seller will reduce the contract price by the difference. There are options to every problem. Once the appraisal is in you can then review the answers if it is a concern. Congrats on your contract! It sounds like you found a gem of a home.
0 votes Thank Flag Link Sat Feb 27, 2010
Yes,
For the most part and especially in Valencia.
Wait til the appraisal comes in and deal with it then.

Harold Sharpe
So Cal Homes Realty
(951) 821-8211
CA DRE License 01312992
Broker,
REALTOR®,
Graduate REALTOR® Institute,
Real Estate Masters,
Certified Distressed Property Expert,
Green,
e-Pro,
harold@socalhomesrealestate.com
http://www.socalhomesrealestate.com
http://www.facebook.com/profile.php?id=100000807660841
0 votes Thank Flag Link Sun Feb 21, 2010
Comps are yesterdays news. They could easily be several months old.

People now are doing their best to drive prices back down. Appraisers are trying to keep prices down.
Comps and appraisals are different animals. The appraisal wins when it comes to financing. If a seller will not accept the amount that a loan can be gotten for they may be trying to sell for a very long time indeed.
0 votes Thank Flag Link Sat Feb 20, 2010
Tough situation. Value is established by mutual agreement between buyers and sellers. It is Market Conditions that set the tone for establishing that value. If the appraiser takes this into consideration (what they should) then you shouldn't have a problem. For instance if the 485K property was a short sale, then that would explain the lower sales price. My advise is to hope that the appraiser comes in at sales price so you can move toward closing your escrow. I'm sure the value is there and in today's complicated environment you should feel fortunate to have secured the home of your choice. Good Luck.
0 votes Thank Flag Link Sat Feb 20, 2010
Ask your realtor to provide the comps that you want the appraiser to use, it may sway him/her in your favor.
0 votes Thank Flag Link Thu Feb 18, 2010
Your concern seems to be that the seller will not want to sell if the apprasial comes in lower than the purchase price. A bigger concern would be your loan approval. Unless you are paying cash or a very large down payment, if the apprasial comes in lower then the purchase price, the lender may not approve the loan. In this case, the seller would have to lower the purchase price to the appraised value or cancel the contract. This could work in your favor if the seller wants to sell and can afford to. You could use this to renegotiate the purchase price.
0 votes Thank Flag Link Thu Feb 18, 2010
Mystery,

For an appraisal to be accurate it should be based on the local market from the perspective of several similar properties. We wouldn't lose sleep over the sale of one property. On the other hand, if all of the comps come in under your projected purchase price, there could be a problem.

This is a time for agents and owners to price homes accurately since banks will not finance homes that do not appraise for the contract price. As difficult as it is fo sellers to accept, listing prices need to be as close to the appraiser's numbers as possible...to avoid your specific concern.

If the property doesn't appraise for the contract amount it may be time for the sellers to get real about their pricing and make some adjustments.

Best wishes
The Eckler Team
0 votes Thank Flag Link Thu Feb 18, 2010
Good information from other contributors so I will just add my cynical comment.

There really is no true predictor of an appraisal outcome.
0 votes Thank Flag Link Thu Feb 18, 2010
Hey Mystery,

Based upon all of your questions to this community over the past month or so, leads me to believe that you are not using a local Realtor to represent you in your purchase. A good Realtor can help you navigate and avoid issues throughout the home buying process.

Regarding your question today, appraisers will use more than one comp in valuating the property. Should the appraised value come back lower than your purchase price, you will have a few options. 1) Ask the seller to reduce the purchase price 2) Increase your down payment 3) Walk away from the deal based upon your appraisal contingency that I hope you have in place.

Best of luck!
0 votes Thank Flag Link Thu Feb 18, 2010
Tia,

There are a whole new set of appraisal rules being fought by the National Association of Realtors. The guidelines are such that a person may be doing the appraisal that has no local knowledge. The comparable sales if the number one criteria used for the judgement of the value of a home. The true test is comparing like to like. Same size, location, condition would be ideal. Unfortuately the home you are speaking of will not have a video and will help to set the appraised value of your home.

Your Realtor should know the current market value as well as how many offers you are competing with. There is a lot of competitiion for home is great locations in the Santa Clarita Valley. My personal opinion is that not buying now will leave a lot of buyers wishing that they had!
Web Reference: http://www.TonyLewis.com
0 votes Thank Flag Link Thu Feb 18, 2010
Your concerns are correct! Your lender will send out a certified appraiser who will use the comps from the areas most recent sales. My question to you is why would you want to pay more for a house if it is worth less then the agreed upon purchase price? If this is a regular sale then after your appraisal is done all you can do is present the the seller with this information and they will have to make the choice whether or not to proceed forward. If they choose to hold firm on their price and you walk the next buyer will meet with the exact same problem!

Jennifer Ricco CDPE, PSC, Retired LAPD
Keller Williams VIP Properties
25124 Springfield Court
Valencia, Ca 91355
661.803.2093
0 votes Thank Flag Link Thu Feb 18, 2010
Hi Tia,

Your description of the situation should be a concern, but I would try hard not to worry too much until that appraisal report comes back to your lender. Each appraiser is different, and so is every house. It's possible there are other comps that you're not taking into consideration, that the appraiser will, that will favor the sales price you are under contract for. Appraisals "not coming in" at the agreed price has def. been happening more often over the last year, but just because the same floor plan sold for $15k less than the home you are in escrow on in recent past, does not mean your appraisal will "not come in" at the value you're looking for.

It's great that, at the very least, you're aware of what could happen in a real estate transaction, and being prepared, and having a plan B...is something that all buyers should have. Working with a good Realtor, also helps.

Good luck!
- Robert Mickalson, Realty Executives
Web Reference: http://www.thescvagents.com
0 votes Thank Flag Link Thu Feb 18, 2010
It will depend on how much bigger your lot size is, and what adjustments the appraiser will make. Also, is the view a waterview? It depends also on how busy a through street you are on, and how they will adjust for that. If it is a major cut-through street, they could take off $20,000, but could add for the increased property size. Also, do they both have finished basements? Central Air? An appraiser doesn't only use 1 house, they use 4, plus 2 listings generally. The 4 comps are the most important, and it will be the average of those. If this is a concern to you, you might want to withdraw your offer.
0 votes Thank Flag Link Thu Feb 18, 2010
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