In the current market environment, you only have two main concerns:
-- Win the house against all other bidders at a price that makes sense to you. If you feel the price is bloated, then stop bidding. The appraiser isn't responsible for what you pay.
-- Hope the house gets appraised for whatever you want to pay so you get the financing you need. In a recovering housing market environment, this is actually quite a challenge.
Zillow's Zestimates are not perfectly accurate, but they're not worse than any appraisals. In the end, both Zestimates and appraisals are rough guesses. Only the market will determine the real price and only you can determine whether you should pay that price.
First, lenders don't do the appraisals. A lender contracts an appraiser to do this. Laws have changed and lenders can no longer select a specific appraiser to complete an appraisal.
Second, an appraisal is an opinion of value (that will be used by and for the lender's benefit, assuming you are applying for a home loan). Appraisers have guidelines that they should follow to provide a good and accurate appraisal. Since the appraisal is for the lender's benefit and not yours, it does not serve the lender to have an inflated price.
Bottom line on this point, it is not likely that an appraisal is going to be "bloated." In my opinion, the opposite is more likely in today's environment.
Your real estate agent should be able to provide you with a competitive market analysis on every home you want to make an offer on and you should do this before you write the offer. If this is done properly it should closely match the appraisal and you should already have a good idea of what the property is worth. With prices on the rise and competition high to purchase a home in many areas of the US, many buyers are making offers above recent comparable prices.
I would suggest that using a lender solely because of the lowest good faith estimate provided may not be wise. You should have faith and trust in the loan agent and have confidence that the lender is going to perform appropriately and in a timely manner. If your agent recommends this lender because he/she has done business with the lender in the past with good results, that's your best bet.
I would not rely on any values provided by Zillow or other 3rd party sites. They are frequently way off the real value and I've seen them as low s 50% of actual market value. As long as you have a good agent looking out for your interests, that's who I would place my trust in.
Hope that helps! Good luck.
Also, short sales typically lag in value behind other sales - equity and bank owned homes, because the valuation may have been done a while ago with the home selling a couple months later. With a fast moving market in certain price ranges in Sacramento, these homes could tend to drag down the price on your home, while equity sales may have a higher value. Since there's not a human brain doing the work on the Zillow estimates, they can't discern the difference. Just like Nichole said, your realtor can help find comps for you in your specific neighborhood.
Appraisals are tough, and you have to remember that they are an opinion of value based on information available. If you are in a suburban neighborhood with similar or exact floorplans to your home that have sold recently, those are usually the best comparable properties. Be sure to review your appraisal when you get it and make sure you agree with the comparables used. Good luck!
There's no such thing as an exact value, the appraised value is simply a value estimate by a qualified professional...however, there are instances where a value can be challenged (pretty much when a value comes in low), this is done with a rebuttal process...since you mentioned 'bloated' values, I'm gathering that you're hoping for a lower value than an agreed purchase price? And in today's market (with virtually no inventory), the seller will ask the buyer to come in the difference with a low value, so this would increase your cash to close amount....
I realize this isn't heartwarming news, but I'm more concerned about giving you the inside track on what really is happening and how the process really works....let me know if I can be a further resource to you!
Best, Jeff M
Appraisals are an opinion of market value or cost comparison value on the day of the appraisal. Appraisers have a set of guidelines to follow based on the lenders underwriting standards and the standards of practice for appraisers, so even though it is an opinion of value it is based on a defined criteria and market comparable properties. The appraiser is also the eyes for the bank and may be instructed to look for certain condition issues, again depending on lenders underwriting guidelines. Since the bubble burst laws changed and the lenders cannot have direct contact or direct control over the appraisers, this is usually by the way of an appraisal management company, which the lender places the appraisal order with and then the management company assigns the appraiser. Problems arise with appraisals when the appraiser is not familiar with the subject area, or type of property. If you are buying in a subdivision it should be fairly easy to find comparable properties. Right now the Sacramento market is increasing in value, that can also be a problem because the appraiser is looking for sold properties to compare, and the pending properties will not show the sold price until closed.
Same issue with Zillow, they don't have new sold data until the property closes, also Zillow doesn't know the condition or other reasons a home may have more value to a buyer than its same model neighbor.
One way to do your own research is with your agent, review the activity in the neighborhood, are properties going pending in just a few days? That would indicate good pricing at what the market perceives value for the area. Your agent may be able to find out from the listing agent if the property went into contract below, at or above listing.
On comparing loans, compare the % APR, that is why APR is shown, so consumers can compare different loan products easily.
These are good questions to bring up to your agent and loan originator, they should be able to answer them so you understand the process.