This Is A "What If?" It'll Never Happen!

Oh Patricia - you have hit on one of my HOT buttons. I believe the appraisers should not have the contract price before going out to the home. When we do a CMA or a BPO we don't have a starting point. It's easy to back into a number if you have one.

Most of the houses I sell now are appraising way high because of the good deals I am finding the buyers....but I think they tone down the appraisal to keep it closer to the asking price.

Patricia,  I agree with several of these comments.  I guess it the appraiser didn't HAVE the sales price, then the appraisal would surely be more accurate based on unbiased SOLDS in the area, and not trying to "pad" to match the selling price.  I have had several lately here in Lynchburg, VA not add up to the sales price (usually no more than a few thousand off), and we have had to adjust the contract price accordingly, so I always make my offers "appraisal contingent".  This happened on my last closing and my buyers thought it was wonderful because it saved them $2,000.  

Hi Pat!  The first purchase contract I ever wrote was some silly number like $132569.  Don't ask me why--I don't even know.  Anyway, the appraisal came in right on the money.  Little ol' Rookie me hitting a value bullseye like that...I've been scared since.

Pat, Definitely the appraiser should not be given the purchase price. the appraisers need to do their own homework to ensure fair market value. Afterall, who pays the appraiser to determine price? The bank, the buyer - the parties who want to avoid being upside down in situation of unforeseeable circumstances! AND, very unethical for loan reps and agents to try to fatten their own paychecks by influencing the the opinion of an appraiser! This was a very good subject!

Patricia, I have always said this.  I do say that if you had 3 different appraisals, you would have 3 different values.  I guess they need something to shoot for?  Dont' you think it is interesting though that if the appraisal comes in too much higher than the sales price, they worry about that too?  Go figure?

I had a similar question when I heard about Texas not recording sales price on county records. So there is no way to know the sales price of homes next door, I had the question is how do you appraise a house?

I have always thought that the appraisal system was a bit screwy.  It would be great if the appraisers had to actually come up with the numbers just like Realtors do...

Wow I was just talking with a client today that lost one of these bidding wars - boy is he thankful now.... the house he wanted so badly is now in short sale for $150k less than he thought he was willing to pay for it.... sometimes there are mixed blessings

Hi Patricia,
How many times have I asked the same question!  Isn't it amazing how many times the appraisal is exactly the same as the selling price?

I remember appraisers wanting to see the other offers when there were multiple offers on the table as they took that into consideration when appraising the property...usually for more than list price. I think the real story is that the appraisal is just an opinion and is only meant to give the bank some level of comfort in lending the money. True value is what the buyer is willing to pay for the property. There are many variables involved, not just what was "similar" that closed within the past 3 or 6 months. It's an imperfect system.

Patricia - I think we all wonder about that from time to time!

Hi Patricia, I often ponder this question too then I realize who pays the appraiser and it all comes clear again. :)

Patricia - It's all subjective and based on opinions and interpretations--the agents, the appraisers and the comps.  We try to come as close to the bullseye as possible, but the real test of value is what someone is willing to pay.  In the end, buyers establish value.

What gets me is the "different" kinds of appraisals -- one kind for a purchase, one kind for a refinance, one kind for an estate or a divorce and so on.  You would think the same house would have the same value no matter what the circumstances but appraisers tend to move the numbers to suit the situation.  

But , hey, I'm with James Downing (above) on this one. If Buyer A is willing to pay the price that Seller B wants.  Go for it! 

Hello -

I thought I'd throw a few cents in as an appraiser (I know, months later... but I'm just now sifting through appraisal blogs throughout AR and condensing them into one posting that can be found here).

First off, I completely concur.  I wish more than anything that we [appraisers] did not know the contract price for a purchase or the 'customer's estimated value'... or even loan amount for a re-fi.  Unfortunately, seeing the purchase contract is part of our requirements.  And as for re-fis, the standard 'Calyx' forms have the CEV or loan amount as one of their fields. 

But let me tell you, with the one lender I have who does not give me the 'estimated (ie: must have) value' on the request, the loan officers are quite shocked at how different the appraisals value is than their handy AVMs.  Most of the time it's not a happy surprise.

As far as coming in right at the contract price (or a bit above/below), it is often because the buyer has a $10,000 closing cost concessions on a $200,000 house.  The concessions are killers.  This is why we have to call all the contacts of the comparables to see what their concessions may have been ($0? $5,000? $20,000? Upgrades worth? A new car?) and adjust accordingly in the sales comparison grid.  If you remember in the old days, concessions were pretty rare.  Can you see how that might inflate house values little by little over time?  The lender only wants to know what their collateral is worth, not how including how much the buyer got 'for free'.

Hope that helps.