Rental Property Investor · El Paso, TX · Member since 2017 · 13 posts · 1 vote
Why get excited about selling real estate at high price in this seller's market, if appraisals will come in lower than the agreed sales price? Anyone encountering this more often this past year than before? Seems like appraisals are putting these overpriced houses back to reality.
Realtor · Portland, ME · Member since 2015 · 655 posts · 552 votes
5y
Agreed with @Daniel Haberkost. We are seeing buyers consistently come up with cash to make up the difference between the appraisal and the purchase price. It's a huge competitive advantage for the buyers that are able to afford to include this clause/term in their offers.
Rental Property Investor · Colorado Springs, CO · Member since 2018 · 682 posts · 729 votes
5y
@Jorge Rubio I run into this frequently with the new homes we're building, the price people are willing to pay is significantly over the appraised value. However, supply is so low relative to demand where I'm building that we've (several times) had buyers come in with extra cash to make it work regardless. As time goes on appraisals are coming up but they're still not keeping up.
Realtor · Portland, ME · Member since 2015 · 655 posts · 552 votes
5y
Agreed with @Daniel Haberkost. We are seeing buyers consistently come up with cash to make up the difference between the appraisal and the purchase price. It's a huge competitive advantage for the buyers that are able to afford to include this clause/term in their offers.
Realtor · PInellas County Largo, FL · Member since 2016 · 902 posts · 810 votes
5y
Many appraisals are being waived up to large amounts if the buyers have the cash. And many do right now.
Appraisals look backwards. And they are not actual determinations of value. I have seen appraisals done in the same week come in up to 10% apart. In a depreciating market, do appraisals raise the value of a property because the sales 3 months ago were higher?
FMV is literally what buyers are willing to pay when it meets what sellers are willing to sell for. Appraisals are just estimations of that for lenders. The lender wants to know that they can get their money back if they foreclose. So they will always be a bit pessimistic.
Right now the market is different than 3 months ago and very different from 6 months ago. The appraisers are following the actual closings, so something that appraised low 3 months ago is now a comp for the new round of appraisals.
In the market, we sell to buyer's agents, to buyers, THEN to appraisers. I can't worry about the 3rd sale when I have to get through the 1st two to get there.
In an appreciating (really any) market, it's not about what it will appraise for, it's about what others are willing to pay.
Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
5y
@Jorge Rubio, obviously each situation is unique. My last flip sold for $35k over asking price. We had no issue with appraisal because we handed over the offer page of the 9 other offers we turned down. If there are 10 parties all offering within $5k of each other, that appraiser would have a lot of explaining to do that the agreed upon price is not the value of the house.
I had an appraiser tell me (this was back in 2016) that her job was to justify the mutually agreed upon price between two parties in an arm's length transaction. And in my experience I have not had a true appraisal of a sale come in short.
Property Manager / Licensed Realtor · Toledo/Columbus, OH · Member since 2019 · 244 posts · 262 votes
5y
Great question @Jorge Rubio and honestly I thought that as well when I started writing offers for my clients however, I will say this. At the beginning of last year, appraisals were hit differently and a bit more of a struggle, but they made it work. Now that we are a year into this crazy market, I am seeing that comps and appraisals are going higher than listing and offer prices (I know right, crazy!). Not sure what market you are looking to buy in, but here in Toledo, things have been pretty crazy. I do see it leveling out though, prices are starting to get back to the median range so that is positive.
Ultimately, here in Northwest Ohio, I see the playing field becoming complacent to where it was before a crazy market. Sure we still have hugely over listed priced properties, if a home is on the market longer than 5 days, you know that the price is too high. We are slowly becoming a buyers market here!
Let me know if you have any other questions or anything else I can assist with!