Banks don't always lowball refi's especially if you're not taking cash out. It depends on the appraiser, many lately I'm noticing are from out of area and don't even have the resources to lookup comps. I'm constantly getting calls from appraisers about my listings that have recently and not so recently sold.
Appraisers are like realtors, they aren't perfect and can be wrong. I like to look at recent sales and realistic comps.
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You have a lot of good information here, but just thought I would add a lender POV. Keep in mind that there technically is no "bank appraisal". All appraisers work independent of banks by law. With new appraisal laws, there is much more separation of parties involved in mortgage transactions, so the appraiser for the refi is not coming up with values to satisfy a particular banks desires. That being said, values can be cut by the banks underwriters if comps used by the appraiser are either old or far away or if there is too much "adjusting". The others are right though in that it always helps if the appraiser knows the area.
Another thing to keep in mind is that even if you are able to get a buyer for more than recent appraised homes in your area, the new buyer is going to need an appraisal from their lender anyway. You could be running into the same problem at that point because the lender bases their programs off the appraised value, not the agreed upon sales price. (If the appraisal comes in higher, then there is no probem, but if lower than sales price, bank has to use that value when underwriting loan). Bottom line is that just because your realtor may be able to find someone willing to pay more, doesn't mean the appraisal will support it. Hope this didn't make more complicated. =)
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Thank you for The clarifications, I agree with Jennie, I had some recent problems with appraisals myself when two appraisals came in totally different 45 thousands to be exact, it really comes down to finding a realtor who knows the market, familiar with inventory and actively listing and selling houses in your area, this is a tough market and home sellers need all the help they can get, Although the market in Cranford specifically is not too bad, what does matter is the marketing strategy which takes us back to pricing your home correctly. I would worry about the price gap and really look carefully at the comps that produced them without worrying too much about the bank appraisal. The right price is what a willing and able buyer is willing to pay for your home not the banks suggested value.
Your Realtor is wrong in this case. There is no consistent rule that an asking price must be lower than a recent re-fi appraisal. You are paying your Realtor to have enough expertise to suggest and defend an accurate listing price that reflects the current market. An appraisal done for a refinance may be right on the mark, or way off the mark. It depends on who did it and how much they know about the neighborhood in question. Many refinance appraisals are done by out-of-town appraisers under extreme time pressure who may or may not give an accurate opinion of value. Especially now in the era of HVCC where almost all refinance appraisals are carried out by AMCs (Appraisal Management Companies) who hire the "bottom of the barrel" appraisers to do these reports. Appraisers who work cheap and meet 3-day deadlines. Are you going to want to base your list price on that type of appraisal? Of course not.
So I would have serious reservations about the competency of a Realtor who would make a blanket statement such as this. Every house and every location is totally unique. There are no "rules" that dictate your list price other than accurate assessment of the current market taking into account active listings, closed sales, expired and withdrawn listings, and current contracts.
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You stated that the appraisal came in at prices of 4 years ago (2005?), we are at 2004 levels now which could be around 10% less. We have been losing about 1% a month in many areas. Remember ,sale prices also reflect the prices from 1 to 3 months earlier when contracts were accepted. In other words even recent sales should be looked at as optimistic in a declining (buyer's) market.
How you price your home though is also dependant upon your needs and abilities. Can you afford to ride out the market until prices rise ?(it could be years) could you rent the place out for a price that covers your carrying costs? If you cant get the price you want, can you afford to sell?
If you do have to sell now, slightly under price the home. All buyers want to steal homes. The best way to push the price up is to get multiple offers and let the market push the price up.
By all means, review the comps, tap a number of agents and get their opinion on pricing and also ask them very specficially what they will do to sell your home. You want to feel comfortable and confident in all aspects fo the marketing plan, including but not limited to price. And be sure you work with a full time agent - this is no market for dabblers ;-)
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Where in NJ are you? Depending on your location, I might be able to recommend someone good (I lived in NJ for 17 years until this year). If not ... I might know people who DO know a good Realtor. Most of them aren't worth your time or consideration. But you know that already :-)
Same problem here. You've got some very good advice but--with the exception of Kenneth who advised actually looking at the comps used by the appraiser--it's all debating how many angels can dance on the head of a pin. "Well, maybe it's this. Maybe it's that." And maybe it is. But you don't know. And neither do we.
Here's what you do. Take a look at the bank appraisal. Actually look at the comps. Are they comparable to your home?
Then check the CMA your Realtor prepared. Look at those comps. Are they truly comparable? In fact, ask for another one. And have him/her run the actives as well. That is, houses that are most similar to yours (geographically, number of beds, number of baths, lot size, age, etc.). Then you go out with your Realtor next Saturday and look at those houses. How DO they compare? Solds are fine--they're a true indication of market value at time of sale. But actives are important, too--they're an indication of what you're competing against. Spend a couple of hours. After all, you're talking about a pricing decision that might be worth $50,000, $100,000, or more.
So, by looking at the bank's appraisal and the CMA with the solds, you should have a reasonably good idea of what your house probably would have sold for a few months ago. But now you go out and actually look, feel, touch, and smell your competition. And that'll help you really refine the number.
I'd also be vary wary of any agent stating that "In NJ" (or anywhere) "the selling price is ALWAYS much lower than the bank appraisal." "Always" is a mighty strong word. It's true that real estate (practices, values, etc.) are local. On the other hand, there's nothing magical about New Jersey. I love the dialog from "My Cousin Vinny":
Vinny Gambini: How could it take you five minutes to cook your grits when it takes the entire grit-eating world 20 minutes?
Mr. Tipton: Um... I'm a fast cook, I guess.
Vinny Gambini: [across beside the jury] What? I'm sorry I was over there. Did you just say you were a fast cook? Are we to believe that boiling water soaks into a grit faster in your kitchen than any place on the face of the earth?
Mr. Tipton: I don't know.
Vinny Gambini: Perhaps the laws of physics cease to exist on your stove. Were these magic grits? Did you buy them from the same guy who sold Jack his beanstalk beans?
I think that one agent may be trying to sell you some magic grits.
Hope that helps.
I would not rely on the refi appraisal if it is using comps from 6 months ago. Look for sales that are less 3 months old if possible.
I agree with Kenneth in that if you have an agent proving an opinion of value that is 20% higher than another agent, that 20 percenter could be telling you what you want to hear just to get the listing only to ask you to reduce price when it doesn't sell.
This is the type of market where you get ahead of the market to sell in the shortest time frame possible and for the most money. You might want to look at what's on the market that is comparable and hasn't sold yet. Then price yourself slighly below what the other homes are asking so that you can create your very own sellers market, one where there are mutilple buyers, who will compete for your house.
If you have your doubts and not sure what to do, ask three different agents for a free price opinion. Same as if you were to hire a contractor. You might get 3 free estimates before you choose someone to get the job done.
I'm an agent in your area! You may wan to consider me....click on my profile pic and send me an email. I would love to help you sell.
Check out what's happening in Cranford and Union County in general.
Thanks for clarifying the situation. So you are selling! I can't agree with what your Realtor is telling you. Appraised prices are one thing and all well and good. But your asking price should usually be in close alignment with recent SOLD comps for your property (true market value). In this market, that number would probably be no more than 5% higher than these comps (or so). If you want a faster sale, then equal to the comps. Of course, you still need to have it prepped and staged very well, etc.
Do you have the recent Sold comps so that you know how how should be priced? If this realtor didn't provide these for you, and without being prompted for them, then I'd avoid that agent.
be careful with the 20% higher agent. Unfortunately some agents will tell sellers what they want to hear which isnt always in their best interest. I have often written in escape clauses into my listing agreements that allow sellers to unconditionally withdraw their listing with 30 days notice as a sign of good faith and a way to stand behind my service. You may want to insist on this and see how certain the agent is with his/her numbers then.
I have bought and sold all over the country [of course in better markets] and found the appraisal was always conservative as the bank didn't want to over-risk...I did check with another realtor who gave me a range 20% higher than this realtor. So I have found one who knows the area for over 25 years and we'll see...it just didn't seem to make sense not to be able to get at least what the bank was willing to finance.
This market analysis will be helpful in guiding the pricing of your home, managing your expectations, and responding to buyer bids.
Good luck to you!
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What's the deal - is this an REO or just a normal resale. May we know more?
I agree with the last two answers, It depends how recent the appraisal was and which comps was used to get to that appraised value, I would suggest getting a second opinion from a local realtor who knows your area, Please let me know if you can use a second opinion @ 908-419-3335
Market conditions can change. When running comps sometimes a realtor needs to go back 4-6 months and sometimes just 1-2 months. So if the market has lots of activity in 1-2months and you are using a 6mth old appraisal I can see why.