How do real estate appraisals work?

Question

I'm in the processing of purchasing a new home. The finance company hired an appraiser, and the appraisal came in at exactly my purchase price. We really thought we were getting a better deal than that. Do they give you the true appraisal value, or do they basically say, yes, it's worth the amount you're paying? What if I would have offered $15,000 more? Would they have said the house didn't appraise out?

Answer 1

Appraisers look at the market(whether it is going up or down) and choose 3 or more comparable properties(properties that have sold within the last 12 months,preferably last 6 months). These comparables have to be as close to design style and appeal to your home and also within an acceptable proximity. Adjustments are made to each for differences between your home and the comparables and the ones with the least amount of adjustments are usually chosen. To appraise a house for exactly what it sells for is lazy and that appraiser is covering his butt. I had only one house out of 400 that appraised for sales price last year. I hate when appraisers do that. It makes he rest of us look bad. The house should appraise for market value regardless of what it sold for. You can always file a complaint with your state board against him, but I'd let it go and tell the lender who used him that you are not satisfied with the report

Answer 2

Appraisers are licensed under USPAP, and are required to follow national guidelines when appraising properties. When an appraiser valuates a home for the purposes of financing a purchase, his job is to use a comparative analysis of the homes in the area and the subject property. This appraisal is independent of the ask or bid price.

Appraisals take into consideration the closed sales in the area of comparable properties, and calculate the value of a home based on its condition relative to other homes in that area. Appraisals look for the most recent sales that have closed that are generally within a one-mile radius. Additions, appliances, foundation, roof, the presence of a garage, and overall aesthetic all play a part in the appraisal.

If you're disappointed with the value of the home, remember that your lender lends only on the LESSER of the purchase price or the appraised value. Had the property been appraised at less than the purchase price, you would have received financing on the lesser appraised value.

Additionally, any estimated value of a home may vary considerably from the actual market value of that home. It's common for prospective home-buyers to believe over-estimated values of homes, only to be disappointed at the close with a value far less than they were told by the agent.

Answer 3

Residential appraisals for normal single family homes (not condos, multi family /income property or commerical property) are based on market value as determined by sales of comperable property which are reported and recorded when property is sold. Generally only sales with in the last 12months are used.(In New York you sign a form 5217 at your closing which goes to the county clerk along with recording taxes).

A standard appraisal lists the characteristics of the subject property being appraised as well as the characteristics of the comparable properties used to calculate the apparaised value (generally 3 comparables).

If you disagree with the apparaisal call the appraiser and discuss it with him. If the apparaisal shorts you on financing advise him that you feel that other properties than what he used for comparables are a better match and ask him to review his appraisal. Your real estate agent should be able to help you get data on comparable property or contact the Town or County Real Property Assessor (values property for ad valorem taxation by towns/ counties & schools) where you are buyng. Do not rely on word of mouth or advertised prices to detetrmine property value.

Answer 4

You've got no complaint. Appraising is not an exact science. Ten different appraisers appraising the same house will give you ten different values. There is no such thing as "true appraisal value". You may well have gotten your house under market value, but it doesn't matter- as long as your appraisal didn't come in under the sales price.