Home Buying in Katy>Question Details

Valerie, Home Buyer in 77859

Does home appraisal value come from the immediate neighborhood or surrounding communities miles away, that are less diverse and/or more upscale?

Asked by Valerie, 77859 Wed Dec 7, 2011

My husband and I saw a house that is priced over $130,000 MORE than what any other home in the neighborhood sold for in the last year. This house has had some very nice updates over the years (redone kitchen, new floors, fixtures), but I don't see where this justifies the exorbitant asking price. The homes sold in this area were similar -- some had pools, some were larger, all were nice inside, though not as extensively updated.

The listing agent's comments are since the property is so unique, any appraiser would have to go way outside the area to find something similar.

How accurate is this? Shouldn't the home value be based on where it is located, and not on homes in the "surrounding" areas? Could a bank decline financing if the appraisal is based on homes NOT in the immediate neighborhood?

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No, Trulia's appraisals come from a bunch of Internet geeks, coders, marketing and sales people who are virtually clueless about Real Estate values and constantly plant seeds in the mind of buyer's that causes them to lose golden opportunities based on ludicrous misinformation!
0 votes Thank Flag Link Sat Jan 26, 2013
The bank appraiser cannot go outside a certain radius and if the home's values come in less than the contract price, the seller will have 3 options.
1) Lower the selling price
2) Split the difference (you will need to put up additional cash to cover your half)
3) Cancel the contract.

Marco Gomez
NY state Associate Broker
Keller Williams Landmark II
Marco.gomez@gmail.com
0 votes Thank Flag Link Fri Dec 9, 2011
It's pretty much urban territory. Two streets w/about 25 homes, surrounded by tract home neighborhoods.
0 votes Thank Flag Link Thu Dec 8, 2011
Depends on the populations density. Urban, suburban, rural determines how far away comparable sales can be.

Urban - 1/2 mile to 1 mile
Suburban - 1 mile to several miles
Rural - 10 miles or more
0 votes Thank Flag Link Thu Dec 8, 2011
When they do an Appraisal, there are many factors that be different between COMP houses;
They will seldom find 4 houses that are real similar.
The ART to doing a good Appraisal is to find these differences and make allowances for them, to financially make them similar.
One of the factors that they have do deal with, is the proximity:
The PROXIMITY is the one factor that is almost impossible to allow for; what value do you place on one COMP being next door, as opposed to 2-3 miles away?
For this reason, the Appraiser will use a dissimilar house that is 1/4 mile away, rather than a similar house that is 3 miles away. Then, they will make $$ allowances for the differences.
The DISTANCE becomes THE MOST CRITICAL factor in the comparrison.

Imagine what the Appraiser goes through when he is doing an Appraisal in a Rural area, where there have been very few sales in the last year?
They may have to go out further, or they may go further back in time.
They may have to compare a Farm to a Ranch or a SFR.
The Appraisers will find every possible combination over the years, and they still have to do an Appraisal!

I hope I've explained it to your satisfaction.

Good luck and may God bless
0 votes Thank Flag Link Thu Dec 8, 2011
Valerie,
The result of an appraisal will largely depend on the instructions the bank imposed on the appraiser when the order is placed. The bank may dictate only homes sold in the past three months or only within the community or within 2 miles. If there are no sale in that community, the appraiser needs to go to 'where ever' the sales occurred, apply value adjustment algorithms, or lapsed time adjustments, reconcile tangible assets, hopefully in like-valued areas.

Highly desirable communities with very low sales activity face this situation all the time. The appraisal WILL COME IN BELOW LISTED OR NEGOTIATED PRICE! The intangible assets of a home that never appear on an appraised value itemized list, and add dramatically to a home value, get left out of the equation when out of community comps are used. My seller and any potential buyers will be made aware of this and adequate instruction will be provided.

It simply will boil down to, what is this house worth to YOU. If the negotiated price and your willing to pay price don't match, then this home is not for you. Based on the 'need to move' motivation of the seller a reduction will come or 'the' buyer who recognizes this home represents real value to them will purchase this house.

Of course, you will and should try to include a 'appraisal contingency' in your purchase offer.
Best of success to you in purchasing your new home.
0 votes Thank Flag Link Thu Dec 8, 2011
Talk with your realtor and see if the house is really worth your time to make an offer. Most seller end up "eating" their upgrade costs as most do not do upgrades that are "above and beyond" what the average person in that neighborhood has done to their homes. Unless this home is something you would be willing to bring extra money to the table to get, then walk away or make your offer and have your agent tell them that this is your highest and best and if they don't bite, walk.
0 votes Thank Flag Link Wed Dec 7, 2011
It does have a very nicely remodeled kitchen w/recessed lighting, pull out drawers; nice tile, new hardwoods in two rooms, fresh paint job and a 4 car garage (vs. 3). Other than these, it is very comparable to the homes in the same neighborhood. Two homes were larger (had pools also), very nice lots, updates not quite as nice as this one. I could see an additional $30-$50K, but this house is listed for $150,000 more than what the most "expensive" house sold for earlier this year. I guess they're just not that interested in selling.
0 votes Thank Flag Link Wed Dec 7, 2011
Usually the house would be compared to those in the immediate area. However, if the home is extraordinary for the area, he might then use comps in "surrounding" areas to put a value on a specific upgrade then add that to the comparable price of the immediate area. Example: if the home compared to immediate area values for sq. ft., beds, bath, lot, etc. is 200,000, but it still has many upgrades the others don't. Then the appraiser will look at each specific upgrade individually, and determine a price per upgrade. To do this he will find homes in "surrounding" areas and cost out that upgrade. For instance if eight equally comparable homes in "surrounding" area sold, four with pool, and four without, and the average difference in price was 30,000, then that would determine that the pool is worth 30,000 and that would be added to the "base" comparable price of 200,000. This way if the homes that were in the "surrounding" areas base price was 300,000, you don't get credit for the other 100,000, because that price is higher do to being located in the "surrounding" area. Also remember that if the house doesn't appraise for sale price, to close you would have to come to the table with the difference, on top of any other fees you would be planning to pay, I.e. down payment, closing cost, etc. If you would like help with the problem, or need a good appraiser that will make sure it's done right, please don't hesitate to call or email me.

Thanks
Eric Domingues
832-605-0001
Domingues96@yahoo.com
0 votes Thank Flag Link Wed Dec 7, 2011
Yes they could DECLINE a home . Many factors come into play for comping a home HOWEVER many home owners are under the great myth IF I SPENT $130K in updates I will receive that value back 100%

As a professional Realtor IF that is the case from home owner who we can't educate we decline taking the listing

Lynn911 Dallas Realtor & Consultant, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
972-699-9111
http://www.lynn911.com
0 votes Thank Flag Link Wed Dec 7, 2011
Valerie,
Home values are generally assesed in the neighborhoods that they are located in. Most banks will follow
those conforming guidlines. I would be glad to help you, find the home that you like in you price range. Please call or email to set up a time to meet.
Best Regards, Richard Luebeck (832)646-2886 or realtor_richard@yahoo.com
0 votes Thank Flag Link Wed Dec 7, 2011
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