I was told quite some time ago that when valuing a house for sale the appraiser based the value on the house. But when appraising to sell to a certain person it was based on their ability and desire to pay for it.

Hopefully by now more sanity has taken over the market. It was this kind of foolishness that led to the meltdown. From what others are saying it sounds like it has.

The value of a house should be based on what the house is worth. Not who has the appraisal done. But keep in mind that over the next 2-3 years prices could drop a lot and you could pay more than it will be worth later.

With the advent of the Home Value Code of Conduct in May of this year there is greater pressure on lenders to ensure that an arms length appraisal is obtained. Consequently, appraisal management companies may now assign the appraisers and expect a portion of the cost of the appraisal for their role. This is intended to ensure that the lender and appraiser are not in cahouts as this was a major factor in the financial meltdown. I have clients in law enforcement that report those bad boys are going to jail. Anyway, there are cases where the effect of HVCC is that the most experienced appraisers are just not willing to take a pay cut to play under the new rules and the appraiser that gets the assignment may not be familiar with local conditions. At the same time, the lending underwriters are putting a lot more pressure on the appraiser's work and asking lots and lots of questions, demanding more data on nearby recent sales (where none exists) and making the job tougher. We are seeing appraised values come in 3-15% below what the buyer and seller had agreed to in a lot of cases because the data that the underwriters would accept or the discounting that they applied to older sales, affects the conclusion.

It is true in the sense that it often does come in near or at the sales price HOWEVER a true appraisal shold not be based on the sales price, it is supposed to be an independant value of what the property is worth in todays market. Although the buyer pays for it, it is to make sure the bank is loaning money on a property that is worth at least what the buyer is paying for it. It also then is supposed to protect the buyer in the sense they are not over paying on a property. Now if the listing broker has done their job correctly, they have put a value on the property using the same porcess the appraiser used by looking at the most similar 3 sales within the last 3 months in the neighborhood and looking at 3 current listings that are most similar in the area. In conclusion if the broker has priced the property at or below market value, it will attract a buyer who makes an offer, the bank will then assign an appraiser that should also come up with a similar value, and you are on your way to closing. If the appraisal comes in lower than the sales price, you can appeal to your mortgage company by submitting comparables as proof the appraiser's value is too low. The bank can then ask the appraiser to review the new comps or may hire a new appraiser. Worst case is you will have to pay the difference in cash, ask the seller to reduce the sales price or will have to wothdraw your offer. I hope this helps.

Yes, the appraisal should come in around the purchase price. if it comes in lower, you are overpaying for the house. BUT the appraiser shouldn;t just value the house based on the purchase price; it should be based on what already sold. Hope this helps.

Danny