Mike, Home Buyer in Jefferson City, MO

Why list a property below appraisal?

Asked by Mike, Jefferson City, MO Mon Oct 25, 2010

I am currently looking to buy a home. I have noticed one that says it is listed $25,000 below appraisal. Should I see this as a red flag that it needs extensive repairs?

Help the community by answering this question:


Lets deal with some myths.

Myth 1: Its harder to appraise in today's market, the world of appraising has changed drastically in the last few years.

Answer: I've been appraising twelve years, its no harder to appraise today than it was in 1998. The methodology and principals are the same, the market is a little different. The HVCC has not made it any harder for appraisers to work. The HVCC is a lender directive and not an appraisal one. In fact, now that we don't have mortgage brokers trying to influence our values by threatening us with future work if we don't hit the number, its much easier.

Myth 2: Appraisals are opinions, no two are the same.

Yes, an appraisal is an opinion, but it is an opinion based on fact, hard facts. While two appraisals on the same property may differ in the final number, they should be in the same ball park.

Myth 3: Appraised values do not take into consideration Absorption Rates.
Answer. Er, yes they do. Have you seen the 1004MC form on most appraisal reports? Even before that form was required, absorption rates have ALWAYS been part of the appraisal analysis. Do you know that an appraisal has to include the Exposure time also? Don't let anyone fool you into thinking that appraisers only deal with historical data, have you read about the principal of substitution?

Myth 4: Appraisers think that all Sales agent are dumb sleazy cheese balls, and Sales Agents think that appraisers pull their numbers out of thin air, and purposely come in low to scupper their deals.

Answer. While its true that some appraisers think Sales Agents are dumb sleazy cheese balls, not all do. It is also true than some agents think appraisers are out to scupper their deals, not all are.
The truth is, there are a LOT of uneducated, unknowing people out there who should not be selling houses. However, in the same breath, there are a LOT of appraisers out there who don't deserve the license they have. All agents and appraisers are not the same. The need for educated, knowledgeable and professional Agents and appraisers is at an all time high. A fancy suit and a fancy car does not make you a good agent or appraiser. The criteria to become an appraiser has been increased, this is good for the business. To be an appraiser in TN, you have to have at least an associated degree, at least two years apprenticeship, 2500 hours of appraisal hours, pass a State Exam, and then pass an interview with a State Commissioner. I got my sales agent license through a mail correspondence course and a final exam. This HAS to be increased and made more difficult in the state of Tennessee. I am a Certified Appraiser, a Licensed Sales Agent, and a member of the National Association of Realtors.

There is so much false information on this site from so called Agents and Appraisers. You really should think long and hard before you make a post here. Its on record. It would benefit the entire world of Real Estate if Sales Agents and Appraisers were crossed trained so that the were proficient in both areas. A great sales agent doesn't neccesarilly know squat about appraising, and vice versa.
0 votes Thank Flag Link Wed Oct 27, 2010
Mike Malvey...
So, you really think that appraisers dont take into account absorption rates?
Of course we do.
0 votes Thank Flag Link Wed Oct 27, 2010
Not necessarily Mke. You've gotten many good points to consider on this subject so far. It can be a good selling tactic for the owner, especially if they have appreciated value in their home. At our current market conditions we have approximately an 8 month inventory of homes on average. The following are some market statistics for Jefferson City, Missouri; average days on market - 71; average list price $150,369; average sales price $145,507 for a 97% list to sales average. If the appraisal has been done within the last 3-6 months, the owner may have the motivation to get the house sold and beat the market! Your best bet is to take an experienced realtor with you to view the home and assess the condition, the price and market averages for that area! Good luck and give me a call for further assistance!
0 votes Thank Flag Link Tue Oct 26, 2010
The age of the appraisal did cross my mind. I'm just trying to eliminate properties which may need lots of repairs so I don't waste my agent's time looking at them. I have to wait another 40 days before I can apply for a home loan anyway.
0 votes Thank Flag Link Mon Oct 25, 2010
Speak with your buyers agent on why's.

Is property a foreclosure? Short Sale ? Is it distressed home with many repairs required?

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
0 votes Thank Flag Link Mon Oct 25, 2010

I would have to agree with the answers you got so far. This is a sales tactic that the seller hopes works toward their advantage. Remember its a buyers market right now there are lots of homes for sale. If you look around you can find a larger size home being sold for the same price as a smaller home in a different area of town.
0 votes Thank Flag Link Mon Oct 25, 2010
Depends on when the appraisal was done. The appraisal may not be current and may not reflect reality. It may be from a bank refi, or something else. They may have been listed at the appraised value and no one even bothered to look at it. Appraisal does not mean repairs are needed, it means the market is not being kind right now. Look at it, then judge for yourself
Web Reference: http://www.YourSTLHome.com
0 votes Thank Flag Link Mon Oct 25, 2010
Listing a house for sale below the appraised price is a sales tactic. It is designed to make the buyer think that a deal can be had. Wouldn’t you like to buy a house for less than it “true value”? That assumes that you are willing to believe that an appraisal is the absolute truth about the value of a property. Appraisals are like the opinions you get at a sports bar for the likelihood that the S. F. Giants will win the upcoming World Series. No two alike.
Sorry, appraisers, but the world of appraising properties has changed drastically in the last few years. Not your fault, I know, but appraisers seem to be using dart boards to come up with prices these days and their aim is usually on the low side.
You should ask your agent this question because it is easy for him/her to answer. Since you asked it here, I wonder if you have an agent. You should! Questions like this one and many more can be put to your agent for the quickest answer. Make sure you get an experienced local Realtor to help you. As a buyer, you should know that the fee for your Realtor is most commonly paid by the seller. Ask you Realtor how that works, also.
Good Luck.
0 votes Thank Flag Link Mon Oct 25, 2010
It could be a lot of things Mike but most likely it does not mean the home is in need of repairs. If an owner has had their home for 10-15 or more years they could have a great deal of appreciation. They certainly could be in a great position financially with the house and the appraisal is for more than they need for their home. They can offer it at a reduced rate and say
0 votes Thank Flag Link Mon Oct 25, 2010
Appraised values do not take into consideration the absortion rate (the time to sell the current inventory) so while the home's value might be what an appraiser states, it could take a very long time to sell at that price. Appraisals are objective opinions by one person and should be taken with a bit of caution. Price is dependent on time...the time that a seller needs to be at their next home. Find yourself an experienced realtor in your area.
0 votes Thank Flag Link Mon Oct 25, 2010
Not necessarily, since appraisal should take the condition into account. One very important, strategic reason is to spur multiple offers! A lot of sellers sit around without getting offers in this kind of market. The seller may be very eager... or very clever.
0 votes Thank Flag Link Mon Oct 25, 2010
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