Home Buying in Dallas>Question Details

Rusk, Home Buyer in Dallas, TX

are you able to sell a house for more than what it is appraised for?

Asked by Rusk, Dallas, TX Tue Aug 14, 2007

Help the community by answering this question:


It is always possible. One drawback is if the buyeris financing, the lender will not lend more than appraised value. The buyer will have to pay the differnce in cash or make down payment high enough that what is financed is at or below appraisal price
3 votes Thank Flag Link Tue Aug 14, 2007
Rusk: There is a possibility you may be able to sell a home for more than its appraised value if you are able to find a buyer who is willing and able to make up the difference between what the lender will lend and what you will accept .

We are involved in a situation now where the owner of a San Diego oceanfront property will not accept the lender's appraised value. The buyers are willing to pay the asking price because the home is truly one of a kind--and they have the means to do so.

As for your home, it is the market that will determine whether you will be able to sell a home for more than its appraised value. Best wishes!
2 votes Thank Flag Link Tue Aug 14, 2007
Roberta Murp…, Real Estate Pro in Carlsbad, CA
In a sellers market, yes, it happened frequently. Buyers believed that the appreciation rate was escalating so rapidly that by the time they closed, the value had probably risen to meet the appraised value.

In a buyers market, few buyers will be willing to proceed. Many states have standard contracts that define this subject. Almost every state contract will have, at minimum, a mortgage contigency. If the property fails to appraise, the buyers will frequently seek to get out of the contract utilizing whatever "out" will work for them.

In NJ, we are definitely in a buyers market, and few buyers would think about paying more than the appraised value.
2 votes Thank Flag Link Tue Aug 14, 2007
Deborah Madey, Real Estate Pro in Brick, NJ
Certainly. If you can find a buyer that is willing to pay more than the appraised price.....But.......why would anyone want to pay more than the appraised price????

Appraisals are for lenders to feel comforable about the projected loan amount. I have never found a lender that will lend money based upon a contract price that was higher than the appraised value. Lenders ALWAYS lend based upon the appraised value. In Arizona the standard contract form has a contingency that states the appraised value must equal at least the agreed upon contract price.

If the sale is for cash.........then the appraisal is not necessary......however, if I were buying the property for cash......I would still want an appraisal to substantiate the selling price.
2 votes Thank Flag Link Tue Aug 14, 2007
If the right buyer comes along, sure. Other replies have already covered the scenarios, but most did not explain that the additional down-payment could be the amount over the appraised value in addition to a 20% down-payment.

You need to talk to your lender, because this will need to be outlined in the Third Party Financing Condition addendum.
1 vote Thank Flag Link Tue Apr 29, 2008
Perhaps....Appraisals are just one persons opinion of the value of the house and can vary greatly. This can certainly happen in unique neighborhoods like Preston Hollow, Park Cities, Lakewood, etc. We also see this with homes with more land. It often depends on the financial resources and motivation of the buyer, and market trends. It can be tough at the lower end of the market where buyers have little into the deal and needing the seller to raise the price of the house to return money to the buyer for closing costs, etc. It may not work in this senario. If you can give me a few more details, I'll try to point you to the right resources.
Web Reference: http://www.teamlynn.com
1 vote Thank Flag Link Wed Aug 15, 2007
Bruce Lynn, Real Estate Pro in Coppell, TX
Ooops... sorry... meant to say Deborah Madey in the post below. Sorry Deborah. :-(
1 vote Thank Flag Link Tue Aug 14, 2007
I absolutely agree with Barbara Madley and her comments below.

Yes... you can sell your house for more than it appraises for IF you have a willing buyer who has the cash to make up the difference. In a seller's market, this happened all the time. It still happens once in a while in San Marino and Pasadena, CA. Although, the market is becoming more balanced and this situation is more rare.

Lenders DO lend on homes where appraisal comes in lower. The buyer makes up the difference between the appraised value and the sales price.

Good luck,
1 vote Thank Flag Link Tue Aug 14, 2007
Hi Rusk: A lender will not lend on a home if the appraisal comes in lower than the sale price, so the only way you could do this is if you have a cash buyer who doesn’t mind over-paying for it, which will be highly unlikely.
1 vote Thank Flag Link Tue Aug 14, 2007
Carrie's comment: "the lender will not lend more than appraised value."

Well, not anymore, it they are a publicly held or government insured lender. Remember those days when they were actually advertising, get a loan for 125% of your appraised value? But there are still people out there with cash and there are private investors.

Okay Rusk, because you are a home BUYER and this is your first question, I'm guessing that you are looking for some assurances that you don't get ripped off. If the seller, you and the lender all hired different appraisers, you could get 3 very different values or you could get 3 reports all saying the value is the contract price. Before you buy, look at homes and guess whether you think they are under priced or over priced. Then a month later see if any of them are "under contract". Chances are, if you thought it was over priced, so did everyone else and it will sit on the market for a long time. If you are good at guessing the under priced homes, then you will have nothing to worry about. A Realtor looks at homes everyday and can get a good feel for this as well. Hire a good one and ask their advice. Then before you are ready to make an offer, have the agent pull up comps and "prove" that you are making a reasonable offer for the home.

Here are a few other scenarios other than a seller's market. The house and land is only worth $100,000. But if the buyer can buy the neighbors home and land too, the land would be large enough to build the McMansion he wants. Vacant lots in a less desirable location of that size sell for $300,000. The buyer would be willing to pay higher than the appraised value.

The buyer wants to change the zoning and turn the home into a Bed & Breakfast or coffee house. Until the zoning is changed, the house only appraises for $100,000. If the zoning change is successful, the value of the home would be $500,000.

A buyer finds out that the home he grew up in as a child and always wanted to buy when he grew up went up for sale. But someone already has a contract to buy it. He offers the pending buyer $10,000 above the appraised price to buy out his contract.

Anyway, just some food for thought.
Web Reference: http://www.oak-park-il.com
1 vote Thank Flag Link Tue Aug 14, 2007
Ruthless, Other/Just Looking in 60558
Yes, it is possible. From a buyer prespective it may not be possible if they are depending on a full price appraisal as their cash available may not allow for this. In our current market most buyers are not comfortable paying over the appraisal price.

Most purchase agreements have an an appraisal clause which references if the property does not appraise, the buyer does not have to buy at the offer price and the seller does not have to sell at the appraisal price. That leaves the price open to negotiation again.
Web Reference: http://pamwinterbauer.com
1 vote Thank Flag Link Tue Aug 14, 2007
Pam Winterba…, Real Estate Pro in Danville, VA
You can however a lender will only lend money on the appraised value of a home. Buyer usually won't come out of pocket for a house that the bank won't even appraise for the asking price. However if the house has GREAT view, example ocean front YES some buyers will pay for the view.
Web Reference: http://www.lynn911.com
0 votes Thank Flag Link Tue Apr 29, 2008
You CAN, but the lender will only lend a percentage of the appraised price, not the selling price. I sold a house last year for 875,000 that appraised at 825,000. The buyer had to come up with extra cash. Some buyers will use this as an opportunity to renegotiate the price.
0 votes Thank Flag Link Tue Oct 16, 2007
Yes you can, but you have a low probability in this market unless you sell terms. For example, rent to own, lease purchase or an option contract.

These are advanced sales techniques so make sure your realtor knows how to do these things...
0 votes Thank Flag Link Tue Oct 16, 2007
Yes. There is no law against selling a house for more (or less) than it is appraised for. An appraisal is just one professional opinion. Only a buyer and a seller can set the price. The appraiser, and the Realtors are just professional with opinions about value.

One of the agents below mis-spoke. She said that lenders won't lend if the appraisal comes in lower than the sale price. She left out the important wording - Lenders will only lend a percentage of the LOWER figure of the appraised value and the sale price. That means a lender WILL lend, they just won't lend AS MUCH as the buyer had hoped for.

Anecdotally, I recall sales where the price was over the appraised value. The first was in contract at $154,000 (This was in 1993 when prices were lower) The appraisal came in at $140,000. The buyers and sellers compromised at $147,000. The buyers simply had to come up with an extra $7,000 in cash. It was worth it to them because the house had a pool, very expensive window coverings, and some other extras that they realized had value to them that exceeded the amount that the appraiser could justify in a "uniform residential appraisal report"

Uniform being the operative word here :: - Sometimes you need to pay more for custom than for "uniform"

The second sale was in a new home subdivision. Builder was selling the exact same model for $135,000. Buyer brought in $2,000 extra cash to buy my clients home because it was move-in ready. He would have had to wait a month to occupy one of the builders houses.

Thousands of HUD Repos famously sold for way over their appraised values. This happened because HUD made an exception in the standard policy just for HUD Repos only. They offered the Repos to buyers for $500 down and agreed to finance the full sales price, regardless of the appraisal. Many HUD Repos sold for as much as 20% more than they were worth because they had such a tiny down payment.
0 votes Thank Flag Link Mon Oct 15, 2007
Jim Walker, Real Estate Pro in Carmichael, CA
It also depends on when it was appraised and what the comps look like. I've already had a house appraised by two different companies (in the same week) and the difference was of 30%!! The reason is it was in the Winnetka Heights area, and comps were architecturally different. An appraisal is the OPINION of the appraiser. In doubt, get a second opinion.
0 votes Thank Flag Link Mon Oct 15, 2007
The answer is yes. If you are purchasing, talk to your agent about how this might happen. I know that your concern is that you might pay too much for a home. Study the market yourself and you will get a pretty good fix on value. Ask your agent to explain what happens if the appraisal comes in for less than sales price, and what your remedies are. Good luck.
0 votes Thank Flag Link Wed Aug 15, 2007
Ultimately the answer is 'yes' but it is not quite that easy. Here are a few considerations:

First, what ultimately determines the value of a property is what a seller is willing to sell for and what a buyer is willing and able to pay. Notice there are two parts to the buyer. The buyer might be willing to pay more but are they able? I've known of numerous occasions when buyers brought money to the table because they wanted the house. I would be concerned since most buyers are using a lender and the lender will order an appraisal. Will the buyer be able or willing to bring more money to the table if the house appraises for under purchase price? That is the million dollar question, and honestly I wouldn't count on it. Although, it does happen.

Second, an appraisal is only the opinion of the person writing it and the comps they selected. Is it possible a different appraiser would come in higher or possibly lower than the first appraisal.
Call a Realtor and find out what they believe market value is and show them the appraisal. Not all appraisals are good. Maybe a good Realtor can help you overcome this hurdle.
0 votes Thank Flag Link Tue Aug 14, 2007
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