Appraisals, their role in the real estate transaction
May 22, 2015 | Richard Sites
In a residential real estate transaction the appraisal is often one of the most contentious parts of the negotiation. And since 2008, the use of local appraisers has been supplanted by the use of appraisal management companies which further muddies up the water.
A property is worth exactly what a buyer not under duress is willing to pay for it. Period.
In fact, at high end auctions at places like Christie’s paintings and other luxury items often sell for more than their appraised value. Affluent buyers can pay whatever they want for anything. But when using a lender it is a different story.
Their lending practices have to be protected by third party analysis of the value of the loan collateral. So a certified appraiser is used to make sure the lender’s funds are supported by the facts. Appraisals can be way off the market value since they use a small data set, but the fact remains that lenders must use them and their valuation is what is used to make the loan.
If the appraisal comes in below the sale price and the buyer is putting down 20%, the loan may not be approved and the deal could collapse. Some solutions are to lower the price to the appraised value (which sellers don’t want) or add more cash to the deal (which buyers don’t want). In truth, the best solution is a little of both if it can be arranged.
However, and this is really important, if you sellers let the deal collapse and lose your buyers it won’t make your house worth any more, it just means you have to start all over by putting it on the market again. So, try and arrive at a mutually agreeable price and keep the deal together. You have too much invested to let it dissolve over the appraisal.
If you would like to have a no pressure conversation about your real estate needs please feel free to contact me at 561-762-4073 or use the form below. Unlike most agents, I have lived in Jupiter for 25 years and know it inside and out.