The asking price on the homes I really like are twice as high as the appraisal value. Is it okay to offer much

Question

less than asking price? The properties have acreage, nice homes but have been on the market for a couple of months. The location is good for us because it is right outside booming areas of town. They are asking $340k for $184k appraised home and $400 for a $180k. Will a bank loan us money if there is such a discrepancy? I was thinking about offering somewhere in the lower $200's.

The county appraisals are online and I've been researching the asking prices vs. the appraisal price.
I have a feeling what is going on with the $400k home. The realtor lives across the street and is trying to sell his $87k appraised home for $400k as well. His house is much nicer than the one we want but I have a feeling he may be trying to inflate the area or sell his home faster.

And also, nearby, the homes that are selling for $300k are assessed for nearly the same.

Answer 1

When someone does an appraisal they first define what the purpose is and how it will be done. If it is done by the county appraisal district then it is rare for them to actually walk thru the house or even drive by. They do it based on permits and recorded age and sales nearby (without knowing the condition of the subject house or those homes that sold!). No one complains if the tax district appraises their home to low, only if it is to high.

On the other hand if the appraiser has been hired by a bank to give market value the appraiser usually walks thru the home and carefully measures it. They also look in great detail at the current sales and examine those properties. It is not unusual for those to come in much higher than the tax appraisal although not always.

So when you say that a house has been appraised for 184,000 (probably for the tax district) it does not mean that is the value.

Ask the Realtor that you hire to represent you for a print out of recent comparable sales. Ask them to help you go over them and help you understand what the true values are. You will be able to base your offer on strong facts rather than mistaken assumptions.

Answer 2

I have no idea where you live but the appraisal is the current market value of like homes in the area. There should never be a difference like that. You should offer what you think the property is worth to you, but bear in mind that the bank or loan company is going to use that appraisal or request a new one. You can borrow in some cases 100% of the appraised value but in most cases 80% of the appraised value is what you should borrow so you don't have to buy other things and get a better rate. Offering $200 for this house is still almost 10% over the appraised value - talk to the real estate agent something isn't right here.

Answer 3

The bank will usually not loan more than the appraisal. You can always make an offer and explain that you cannot get financing for more than that. There must be some reason they are asking so much more than the appraisal, perhaps the value has skyrocketed since the last appraisal, or there is some immediate development being done in the area that is going to make this land very valuable.

Answer 4

Do not confuse 'county appraisals' with certified appraisals for market value. The county's valuation for tax purposes does NOT necessarily reflect the market value of the property.

Many times, they're not even close. If the county valuations are that far removed from asking prices, I'd venture that the county is way off on its appraisal for taxes. (Frankly, that's irrelevant. As long as all properties in the taxation are equally appraised at such a percentage, taxation is still fair.)

I suggest that you contact a qualified appraiser (for market values) and get an idea of what these homes are truly worth. You might save yourself from a very embarrassing situation by offering half of what they are really worth.

Answer 5

OK...are you talking about the apraisal you orderd for the home or the apraisal the county did for tax purposes? The tax apraisal will be half the value of the home, which means the actual value of the home would be about what they are asking. If you ordered an estimate and is is half of what they are asking then I would definatly offer less. No bank is going to loan you more than what a home is worth...if you defaulted on the loan you would owe way more than what they could possibly recoupe by selling the place.

Before you offer anything order an apprasial of your own so you know what kind of loan you can get (if the aprasial comes back at $400k then you know you can't afford this place and you can move on).

Answer 6

Don't base your estimate of the value on the assessed value for tax purposes. That often bears little relationship to the true FMV of the property. Have your agent work up a comparative market analysis and base your offer on that. I sold a place in TX last year that was on the books for $84k for tax purposes. The comps came in at $105k as did the appraisal. I finally sold it for $104k.

Do keep in mind that in many jurisdictions, the assessed value for tax purposes will be re-set to the sale price once you close. This can have a massive impact on your tax bill.

A bank will base their loan amount on the lower of the agreed selling price or the appraised value. That appraisal will be based upon an independent appraisal of the property's value.

Answer 7

How do you know what they are appraised for if you haven't put a bid on them yet?
If the homes are truly appraised for that much lower than the asking price, they will never sell, because the mortgage company is going to do their own appraisal and approve a mortgage based on that number and if you really want the house and the owner won't lower their price, then you would have to come up with the difference. With today's real estate market, I wouldn't offer more than the appraised value. If they won't lower their price, then you have to move on. Does your real estate agent (buyer's rep) fell the houses are worth what the sellers are asking?

Answer 8

Sounds like something's really crooked there. No, really. There was a similar scheme in our area a few years ago.
Out of curiosity, are they newer built homes, maybe by the same builder? Do you end up talking to the SAME bank person?
Booming or not, DON'T over-pay! It's a quick road to great loss.
See what the town says it's worth on the taxes, compare it to the figure an INDEPENDENT appraiser says it is worth, then if you really want to, make an offer for what you really would pay.
A bank WILL loan money(overpriced) if the person in the bank is in on the scheme. IT HAPPENED HERE.

Answer 9

The bank will never fund it.

Why would a bank want to lend on a property that appraises for half the price? Even if you put down 20% on the 400K house, they are lending 320K and if you go into foreclosure they lose their 320K and get back a house worth 180K on return.

Even if you offer in the lower 200's, be prepared to put down a lot of cash, probably 50K-100K. AIf the appraised value is 180K, the bank won't want to be into it for more than about 160K, so if you pay let's say 225K, then you need to come up with a 65K down payment.

Answer 10

As the others have said, you are relying on a county tax assessment/appraisal, which has nothing to do with real market value.

My county tax assessment value is about half of what my home is worth. Nothing crooked going on there, it is just the way it is. And I'm not complaining.

You can offer whatever you want, but no one in the US is going to sell a house for half of what it is worth.