My full reply to your question got overly long so I turned it in a Trulia blog post. Check it out here:
The Appaiser is an independent party rendering a very legally regulated opinion as to whether the property appears to be worth the offer price. S/he searches to find 3 comparable sales to base their opinion. If they can't find three supporting sales, then they will come in with a value "below value". 9 out of 10 times (in Silicon Valley) they are able to find comps that support the purchase price.
Your decision regarding the offer price should not have been based on what the appraisal may say. You probably have an Appraisal Contingency that gives you the right to cancel (and get your earnest money back) if the appraisal comes in below the offer price.
The loan is most often sold to an investor. The loan must have documentation showing that the house is worth at least as much as the loan or it will be very difficult to sell the loan.
If the appraiser says the house is worth much more than it actually is, the buyer could come up with a scheme to defraud the bank, borrowing more than the house is worth, then walking away from the mortgage obligation.
Home values in http://julianalee.com/zip-code/95014-statistics.htm
Top 2 agent nationwide at Keller Williams Realty, the nations largest
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Over 1,000 homes sold in Santa Clara County and San Mateo County
CG, YOU have already established the house's true value on the open market, by entering into a deal with the seller.
Lenders need appraisers because the loan officer isn't lending their own money. If they were, like in the old days, they'd go out and look at the property and decide if it was worth making the loan. Today, they hire an appraiser to go out and give an OPINION of value which isn't a guarantee, but it can crash a deal.
Betty is factually wrong, because the law doesn't allow banks to hire "their own" appraisers. So the appraiser has no reason at all to "come in at value."
So, Betty, your strategy is to encourage your clients to make an unrealistic offer and hope for an appraisal under the contract price in order to give the buyer the opportunity to renegotiate the price. In your opinion, the buyer is getting shafted if the appraisal actually comes in at the agreed upon price.
You say that you â€œought to have more leverage if you are the only one making an offerâ€ but why would you offer a high price if you are the only one making an offer? Do you really think it makes sense to offer a price that you believe is too high if you are the only one making an offer? Would you not start lower and expect to negotiate to some middle ground rather than start high and try to negotiate back down?
You say you are retiring for the real estate business. I and the rest the â€œcretinsâ€ will not miss you.
The appraiser receives a copy of the purchase contract and now their job is to find three recent closed sales similar to the property on the contract. Then through addition and subtractions come up with a value to equal the purchase contract.
When the purchase contract price does not match recent sales then the value will come in higher or lower.
So, no, it is not a conspiracy to "fix" pricing, but simple an analysis based on available recent sales. As to whether its in the buyers best interest to push through, that's a decision that can only be made by the buyer.
Underwriters today are much more strict and look more closely at all appraisals coming in on properties... So because of this, appraisers have to have all the information required to determine what the fair market value is on a home. Because of the stricter/tighter lender guidelines of today, it is very hard (if not highly impossible) to commit fraud and lie about a value JUST to push a deal through. To be honest, it's not worth losing your license over!
Be happy that your home came in at the value you paid. In this over priced, multiple offer market, that does not always happen....
And, not sure if "cooling" is the appropriate term for our market right now... It's more like the seasonal slow down.... And we still have very little inventory to chose from, so there are buyers still out there that have been trying to buy for months...
Quote "IS THIS PROPERTY WORTH THE AMOUNT BEING PAID."
" HOW MUCH IS THIS PROPERTY WORTH"
The purpose of the appraisal is to assure the Bank that the property is worth at least the price being paid.
What you describe is the result of the Appraiser answering the question asked.
If you want to know how much it's worth that's a different task for which a 2nd fee would be required.
Hope this explains you legitimate question.
It is very common for the appraised value to match the purchase price.
In a stable market, the value is determined by recent comps, but also what someone is willing to pay has some influence. That's why, in most cases, the appraised value will match the offer price.
It's highly unlikely that something "fishy" is going on.
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