Realtor says the bank appraisal can tell home value...

6 Replies

Currently, my spouse and I are renting an apartment. I found a home that is unoccupied by the owner that has an asking price of $148,000, but I know from comps that similar homes sold recently for about $133,000 or so. We offered $138.5k but the seller declined. afterwards my realtor sent over a list of comps which the selling agent did not disagree with. From the sounds of things the seller will sell between $145k-149k. 

I think the seller is being a bit irrational and we are we are considering walking. Our realtor suggested that we should offer $145k, and because it is contingent on the bank's appraisal, we will not be paying in excess of market value. I realize banks are more careful now post-bubble but I have done a bit of research and it appears that banks uncommonly appraise homes for less than what they sell for, and usually above. I also do not like that appraisers SEE the amount we want to buy the home for--just how could that not bias the appraiser. 

Also, because we are first time home buyers and only putting down 3-5%, the agent says that the buyer might come down if it appraises for less than it is worth. I do not like the idea of using a bank appraisal as a bargaining chip, and again I have some questions about their accuracy. 

There are not a lot of alternatives on the market in the area we want to be in that we also like; the only other alternative at this point, if we do not get this home, is to rent for 3-6 months to see if the inventory improves. 

Anyways, I am interested in your thoughts. What do you think of the realtor's advice? Is the bank's appraisal accurate, and is it a good idea to use it as a bargaining chip?

I would NOT offer a higher price than I was comfortable with expecting it to appraise lower.

#1. if it appraises at your offer, your stuck feeling like you overpaid and you probably did.

#2. You are sort of correct in thinking that appraisers have the offer price. Some appraisers seem to try and justify that price, while others disregard this and just appraise to whatever value they end up with. I just had a house appraise at $240k and then a few weeks later $215k... 

#3. Sellers in stronger markets may not just lower to your offer. On my house that just appraised at $215k, if we didn't come to a much higher agreement, I would NOT have sold that low and would have simply moved on to the next buyer. A low appraisal is not a guarantee you get it at that price.

Now as an Agent I understand how values work and how stubborn sellers could be because they value the home with a mix of greed and put a high value on the memories created in the home. Ad buyers always want the lowest deal not realizing most agents priced the home according to the market. Appraisals can be tricky because they do not only take in to consideration the past sales but what kind of loan was used to close the loan for example if a home sold at 149k all cash and 3 sold at 140k-145k with a FHA loan the 149k would not be considered on the evaluation. You won't know until tyr appraisal comes in.

I never let my clients make an offer they are not comfortable with, but I ask them what is it worth to be in your desired location? Offer 145k and have them pay all  Closing Cost that's my advice.

Every buyer thinks a house is worth less than they can buy it for. Every seller thinks a house is worth more than they can sell it for. These 2 indisputable truths are the only reasons that real estate agents even exist.

I appreciate the comments so far. If a bank's appraiser was really good at valuing the property, nationwide, I would expect that roughly 50% of appraisals would come under the offer price, and 50% above, but that does not seem to be the case. 

Originally posted by @Ross Midwest:

I appreciate the comments so far. If a bank's appraiser was really good at valuing the property, nationwide, I would expect that roughly 50% of appraisals would come under the offer price, and 50% above, but that does not seem to be the case. 

 Thats because you misunderstand what an appraisal is. An appraisal is not to determine the value of a property. An appraisal is one, of several tools that a lender uses to mitigate their risk in lending on a property. The appraiser starts with the contract price then works backwards from there to see if there is data in the market to support that price. The market ultimately determines the value of a property, and the contract price is the ultimate data point of the market showing the properties value.