Does an appraisal should match the price agreed between seller and buyer or bank expectations?

Asked by CAROLINE RYS, Brooklyn, NY Wed Jul 17, 2013

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Jennifer Fiv…, Agent, Red Hook, NY
Thu Jul 18, 2013
It will match only sometimes. Most time it is higher are lower.

During the economic downturn it was not uncommon for an appraisal to be less that what the buyer and seller agreed to. If this was the case the buyer would have to make up the difference, walk away or re-negotiate with the seller.,
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Rhonda Holt, Agent, New York, NY
Thu Jul 18, 2013
The appraisal is simply done to let the bank know what the real value of a property is worth before they commit to lend you the rest of the money. The appraisal protects you and the bank from over paying for a property.
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Anna M Brocco, Agent, Williston Park, NY
Thu Jul 18, 2013
Depends, some come in higher, some lower; generally it matches current market value...
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Jim Olive, Agent, Key West, FL
Thu Jul 18, 2013
The appraisal should match the market value of the home. All too often, though, Appraisers don't do a real appraisal, they just make sure the appraisal is enough to make the loan work. I re-financed a home a few years ago that had a market value of $300k. I was only re-financing half that amount, and (low and behold!!) the appraisal came in just above the refi amount, nowhere near the market value of the home. One of my pet peeves...if I am paying an Appraiser to appraise my property (regardless of reason), I EXPECT them to give me a reasonable assimilation of current market value!!
The bank, however, is just looking to see that the amount they are loaning on the property is supported by the appraised value. If the appraisal comes in too problem, but if it's too low you'll have to make some decisions...get a second appraisal (at your expense), or make up the difference out of pocket. Whenever you're talking about "value" you are likely to have many correct answers. Market value may be VERY DIFFERENT than what a buyer might be willing to pay if they really MUST HAVE a certain home. Similarly, a seller who LOVES their home and raised their family there may feel the value is much higher than the market value suggest. None of those "values" are wrong. If a buyer feels his or her house is worth $500k and the market value is just $250k, and they will not sell for less than $500k, they are not very likely to sell it, because they would have to find a buyer who agrees that it's worth $500k, which probably isn't going to happen because most buyers will go buy the other houses on the market similar to it that are selling for $250k. But the seller has that prerogative.

While the Market Value should typically be expressed in a range (ie: $475k to $500k), it is a fairly scientific figure with a little bit of "art" thrown in. Where it gets tricky (and often more "artsy") is where there are no recent sales of similar homes to compare with. Very interesting subject, often clouded by emotion, and NEVER as simple and straight-forward as we would all like it to be! Best of luck with your purchase..
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Kathryn Lilly, Agent, New York, NY
Thu Jul 18, 2013
Appraising is an art it is not a science, especially in neighborhoods that are not cookie cutter houses, or every house is very different from the one next door, ie most downtown Brooklyn neighborhoods. Where one is completely restored with many upgrades and next door has not seen a contractor in 50 years! You add that to todays market where the market is appreciating rapidly and every sale is higher than the last. And the "comps " that the appraiser is using where deals probably made; going to contract 6 months ago, it is difficult.
It is also frustrating when you are the winning bidder in a bidding war; at least 6 other people were all willing to buy the house above the asking price and the appraisal comes in 20% below the asking price! These things happen in this market.
Kathryn Lilly, Broker
Realty on the Greene, LLC
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Javier Menes…, Mortgage Broker Or Lender, Melville, NY
Wed Jul 17, 2013
Caroline, the appraisal should come in at what the sales price is or more. So if you sign a contract for say $300,000 this means that the house should appraise for at least $300,000 or more. If the appraisal comes in for less than $300,000 that means that you would be overpaying for the house.

If my response was helpful, consider clicking BEST ANSWER!

Javier Meneses
Senior Loan Officer
NMLS #23130
310 Crossways Park Drive
Woodbury, NY 11797
(516) 606-9648 Cell
(516) 740-4478 Office
(516) 918-5383 Fax
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Ron Thomas, Agent, Fresno, CA
Wed Jul 17, 2013
The Bank wants the appraisal to be at Market Value and hopefully, that will be more than the Loan.
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