My agent gave comps, which are $100k less than listing price. Then he suggests me to offer the listing price, with appraisal clause to be in the game.

Asked by trafficstudies, Milpitas, CA Mon Mar 4, 2013

Seller came with counter offer by increasing the price by another $60k. Now my agent tells me just go with the seller's price to be in the game? What happens if lender/appraiser thinks same way to be in the game and appraise the property to the seller's new asking price in stead of its real value. I am really not comfortable. I believe the game is ready to be rigged again. Any opinions?

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Don Tepper, Agent, Burke, VA
Sun Apr 7, 2013
Great advice from Larry.

So, if I follow you correctly--and let's say the house was priced at $500,000--the comps were at $400,000. You offered $500,000. The seller countered at $560,000. Your agent tells you to agree to $560,000.

You're concerned that the appraiser might come back at $560,000.

If that's the correct scenario, run as fast as you can. Gee, doesn't ANYONE remember the market in 2005 and 2006? Hey, fellow Realtors, this was what was happening right before the bubble burst. The market's overheated, the seller is greedy, and it's a game of musical chairs.

Do NOT rely on the appraisal. It's true that appraisers are more conservative now than they were back in 2006. But plenty of appraisers will still rationalize: If there's a willing buyer and a willing seller, then (absent a huge amount of other evidence) that's about the right price.

Yes, the game is rigged. Absolutely. Appraisers see how much you and the seller have agreed on. If the game were fair, the appraiser would have no idea. The appraiser would do his/her job based on the comps and market trends. But that isn't the way it works. Besides--let's be blunt here--appraisers hang on to their clients by facilitating transactions. How long do you think an appraiser would be called upon by a bank if he/she found that 8 out of 10 houses didn't appraise for the contract price? Not long.

As for other agents here who might say, "Hey, you don't know Hayward." Darn right I don't. But if I smell a skunk, I don't need to know that a skunk's been around, either. I've seen that pattern before, and not so long ago.

Your gut is telling you there's something wrong. ("I am really not comfortable. I believe the game is ready to be rigged again.") You're right, of course. But even if you weren't, I'd say: If you're not comfortable, don't do it.

Hope that helps.
1 vote
Curly Sue, , Texas
Mon Apr 8, 2013
Sounds like a really risky, stupid game!
0 votes
John S., Home Buyer, New York, NY
Sun Apr 7, 2013
It is not a sign of healty market. I would take all advice from agent.
0 votes
Jerry Huiming…, Agent, San Lorenzo, CA
Tue Mar 5, 2013
I am not sure that we should give general comments on a specific case. Should we ask which house? How much is asking and how many offers first? In today’s market, selling $100K higher is not so uncommon.
0 votes
Hamed Barakz…, Agent, Pleasanton, CA
Tue Mar 5, 2013
The most important thing is to do what you are most comfortable with. Purchasing a home is not like buying a pair of pants that you can change your mind on after close of escrow. While there is a 'checks and balances' system in place with a purchase contract, which pertains to the appraisal contingency, it is important to know that the seller is not obligated to reduce a price even if the home does not appraise for fair market value. Price is relative. While a vast majority of people prefer to purchase a home at the appraised value, many simply don't. This is due to different factors, but regardless if it is a buyers market or sellers market, it comes down to how much one love the home. One person may be willing to pay fair market-appraised value for a home while the other pays 10% or 20% over market value because it may be their dream home; not to mention they have the financial capability to so.

Additionally, appraisers don't necessarily operate like they did during before the housing bust. There were regulations that were implemented a few years ago referred to the Home Valuation Code of Conduct (HVCC). Every lending institution has a 3rd party appraisal company that appraises the home and subsequently an internal department that reviews it to ensure it meets their guidelines. I can assure you that often this process has become very conservative with regard to valuation.

If you wish to 'play the game' you can revise your offer and if accepted you can appraise the home. However, please keep in mind that while the seller can; he/she is not obligated to reduce the price if it comes in less that the agreed price. Other options include shaking hands and parting ways, meeting a middle ground where the seller reduces the price, but not as far as it has been appraised for and lastly you can be pressured to pick up the tab (difference) and proceed forward and buy it. I hope this helps.

Hamed Barakzoy
Realty World Acclaim
0 votes
Sunil Sethi, Agent, Fremont, CA
Tue Mar 5, 2013
Focus on the current pending transactions. Ask your agent, what they went for, how many offers did they get, and take a look at the trendline. We're seeing each succesive sale being higher, by $5k, $10k, $15K, $25k... We're also seeing what we haven't seen since the go-go days, which is the zero-zero-zero offer.

Zero days to remove contingencies
Zero days to remove appraisal contingencies and
Zero days to remove loan contingencies.

Yes! It's come back to that non-sense. Fortunately we are not seeing a repeat of what made the market blow up last time, which was free money loans (Stated Income loans). The market crashed because the money lenders finally figured out that it wasn't such a good idea to give money to people who could never afford to pay them back.

The good news is that today's buyers are for the most part qualified buyers. They have to prove they can qualify for the loan. Also the folks winnning the deals are those with the ability to take an appraisal varaince, so these buyers have skin in the game. I say for the most part they are qualifed, some are not in my book, I would never lend money with a Debt to income ratio of 45%. If you are spending 45% of the gross income on housing that is insane. I don't know why banks allow it.

However, the only thing that can deflate this market is if the supply spigot were to start gushing homes or a major recession were to occur. At some point we'll get more supplies, and I think it'll come from older home owners deciding to leave the Bay Area to retire somewhere cheaper. As prices are quickly rising to the housing bubble peak, this change will start to happen this summer and more the next couple of years. As I dont' expec this to be large scale, I don't expect to see a buyer's market again however until the next recession, which we can't predict.

Only an irrational buyer can succeed in buying in this market, but as the trend right now is towards a higher price, and no one can predict the cause of the next major depression, buy today, for you should be rewarded tomorrow.

Sunil Sethi
Sunil Sethi Real Estate
Web Reference:
0 votes
Lance King, Agent, San Francisco, CA
Tue Mar 5, 2013
The first thing you need to understand is that appraisals often have little to do with real world market value.

I would ask your agent why he thinks you should overpay market value by $100K. If he doesn't have a good answer, I would look for another agent. And, "because that's the way the market is now," is not a good answer in my view unless you don't care about resale value.
0 votes
Annette Law…, Agent, Palm Harbor, FL
Tue Mar 5, 2013
IN a select community of custom built homes with few sales this is not uncommon.
Knowing EXACTLY how the appraisal process works one CAN anticipate a low appraisal.
The seller and their agent are correct in not allowing a third party with an entirely different objective (I know you thought the appraisal process was about assessing value, it is not, it's about reselling the mortgage) to establish a shill value.
Your agent, contradicting the comments of some, understands the reality of your exist real estate reality. If you want to live in this community, you need to stop second guessing your agent. Turning to the internet for advise indicates where the problem REALLY lies.

How has your strategy been working to date?
How much do you want the house?

Best of Success,
0 votes
My NC Homes…, Agent, Chapel Hill, NC
Tue Mar 5, 2013
Your Realtor doesn't know what their doing and you need to fire them today and go find yourself an an experienced Realtor. Comps aren't $100,000 apart in value.If what you've written is true this data is worthless as is their advice.

I've attached a link below on how to find a great Buyer Broker regardless of where you live. Hope this helps you find one who doesn't have rocks in the head.
0 votes
Russ Ravary, Agent, Commerce Township, MI
Tue Mar 5, 2013
I would be getting a new realtor. That seems so strange to buy a house $100 over the comps. Is the agent in cahoots with the seller? How did you find your agent? Run, buddy, run
0 votes
Yamille Koso…, Agent, Oakland, CA
Mon Mar 4, 2013
The market is so very competitive right now and yes, in many areas recent comps do not support either the asking price or the eventual selling price of the property. Even though your agent's job is to make offer recommendations based on market conditions, ultimately it is up to you to make an offer that you're comfortable with - you're the one that has to pay the mortgage every month.

It is also a reality that offering less than asking price on a hot property isn't likely to win you the bid. Then there's the appraisal based on recent comps, but with market conditions changing so rapidly - their opinion of value may not match what buyers may be willing to pay for this particular property. If you're not comfortable in this situation, it might be better option to walk away from this one and wait to bid on another property you're more comfortable with. Or just wait out the market to see if inventory picks up and buyer demand evens out. But please, also make sure you really trust your agent and that they're acting in your best interest.

Best of luck!

Yamille Kosowan
Keller Williams Realty
0 votes
Pacita Dimac…, Agent, Oakland, CA
Mon Mar 4, 2013
What is always told: market value is whatever price the buyer is willing to pay.

If you're not comfortable, then perhaps this is not the right property for you, and neither are you the right buyer for it.

You may be second guessing yourself.....appraisers as well as lenders are a lot stricter today than during the peak of the market. One of the challenges we face in this heated market is when the property does not appraise. When that happens, you have some options

1. Ask the seller the reduce the price per the appraisal
2. Ask to meet the sellers part of the way --- his reducing the price by a certain amount, your making up some of the difference between your offer and the appraised value (some folks ask for the parties to meet half-way)
3. Or walk away
4. Or challenge the appraisal and hope you succeed
0 votes
Anna May, Agent, Hayward, CA
Mon Mar 4, 2013
Seeing that you're a buyer in Milpitas, CA, your agent may very well be giving you sound advice. The market is very competitive in the Bay Area right now. The lender/appraiser will judge the value by the recent comps and more often than not, they appraise low when properties are so quickly being up-bid due to low home inventory. Do you trust your agent? If so, heed his/her advice. However, if you're uncomfortable, then for sure don't do it. You just might not be a property owner for a while...
0 votes
Nina Daruwal…, Agent, Cupertino, CA
Mon Mar 4, 2013
How old are the Comps?? Property prices have been rising crazily last 3-4 months! Comps seem to fly out of the window! How many Offers are on the table? How much do you want this home? How much do you have to have it? Is it worth to you to pay the price it is demanding? What are other home/s in th area going at? Des this have the 3-4 most important things you want in your home? Oh so many questions...........
Yes, if it a multiple offer situation and you are one among multiple counters, you dont have a choice but to accept, or not! Sit down with your Realtor, and discuss the full situation and make the choice most comfortable for you.........jst know, market is going up at every home, so get in while you can.
Wishing you only the Best!
Nina Daruwalla
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0 votes
Scott Miller, Agent, Boca Raton, FL
Mon Mar 4, 2013
If you're not comfortable, that's a gut feeling. ALWAYS go with your gut feeling in real estate. If it doesn't feel right, back out.
0 votes
Mack McCoy, Agent, Seattle, WA
Mon Mar 4, 2013
Don't pay more than you want to, and if you keep losing properties to higher bidders, then recalibrate.
0 votes
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