Appraisal Report Value
- Thread starter venkat
- Start date
usctrojancpa
Well-known member
Most appraisals come in at the contract price but as long as the appraisal doesn't come in below the contract price it doesn't really matter. Remember that appraisals can be somewhat subjective based upon the comparable properties that the appraiser selects along with their adjustments. There's no way the seller will come back to you and ask you to increase the purchase price as they don't see the appraisal. Your lender will base your loan off the lower of the appraisal and the contract price. At the end of the day, it should just give you a good warm toasty feeling that you are purchasing the property at a slight discount to the current market.TustinRanchResident said:
sgip
Well-known member
It also means you got your money's worth when your lender's appraiser went out. More often than not the typical appraiser will hit sales price (not list price) down to the penny. How the closed comparables, the adjusters for time, SF, quality, condition, etc, just happen to meet the x minus price almost every time is nothing short of a miracle.
FHA requires lenders to send appraisers a copy of the contract. For conventional loans it's not a requirement but most Realtors will cough up the sales price data to the appraiser in fear that the final value might come in low. Isn't that the point... to hit a proper value, no matter if it's high or low?
Would love to see out of state appraisers do the work rather than someone who is local. Why? Local perspective is somewhat meaningless in determining value. Google Earth can show you the street conditions. Most of the school, city, and commercial data is easy to find on line. One does not need to stand inside a home to tell if it's of good value. Appraisers spend about 15 to 20 minutes in a home at most during an on site appraisal. That's precious little time to get a good sense of the value of the construction, especially since they're measuring and picture taking during most of those 15 minutes. An appraised value should be a function of data, not personal impressions. One persons castle is another persons tear down so adding personal knowledge of the area simply helps to puff the value up, rather than help construct an accurate view of the value of the property. Yes, this would complicate things, but I'd much prefer a complicated closing to an artificial one.
If you're spending $500 or so to find out value, wouldn't you want it to be as accurate as possible?
My .02c
SGIP
FHA requires lenders to send appraisers a copy of the contract. For conventional loans it's not a requirement but most Realtors will cough up the sales price data to the appraiser in fear that the final value might come in low. Isn't that the point... to hit a proper value, no matter if it's high or low?
Would love to see out of state appraisers do the work rather than someone who is local. Why? Local perspective is somewhat meaningless in determining value. Google Earth can show you the street conditions. Most of the school, city, and commercial data is easy to find on line. One does not need to stand inside a home to tell if it's of good value. Appraisers spend about 15 to 20 minutes in a home at most during an on site appraisal. That's precious little time to get a good sense of the value of the construction, especially since they're measuring and picture taking during most of those 15 minutes. An appraised value should be a function of data, not personal impressions. One persons castle is another persons tear down so adding personal knowledge of the area simply helps to puff the value up, rather than help construct an accurate view of the value of the property. Yes, this would complicate things, but I'd much prefer a complicated closing to an artificial one.
If you're spending $500 or so to find out value, wouldn't you want it to be as accurate as possible?
My .02c
SGIP
Thanks USCTrojanCPA...
Warm toasty feeling is good! However, since appraisal came just in time of repair request, seller is saying "purchase price includes all repairs". Repairs are probably $1500 worth, but since I am first time home buyer - I would be better off if they had accepted the repairs, instead of me doing myself.
sgip, I was under the impression that appraisal is based on real knowledge, facts and calculations. But after seeing appraisal report (for first time in my life), it is just based on CMA (Comparative Market Analysis) of similar properties sold/for-sale in last 6 months. It just says that "MOST EMPHASIS WAS PLACED ON THE SALES COMPARISON APPROACH, AS IT BEST REFLECTS THE ACTIONS OF TYPICALLY INFORMED BUYERS AND SELLERS. THE COST APPROACH WAS CONSIDERED SUPPORTIVE"
For me (may be it is just me), it is BS - Since my (informed buyer) comps will become standard for next sale in the area and the balls rolls on. So there is nothing called FACT in appraisal process. If there is a greedy seller or touchy buyer, all the comps could be skewed to an extent that further appraisals are questionable!
Still learning how each involved entity in real estate works...
Warm toasty feeling is good! However, since appraisal came just in time of repair request, seller is saying "purchase price includes all repairs". Repairs are probably $1500 worth, but since I am first time home buyer - I would be better off if they had accepted the repairs, instead of me doing myself.
sgip, I was under the impression that appraisal is based on real knowledge, facts and calculations. But after seeing appraisal report (for first time in my life), it is just based on CMA (Comparative Market Analysis) of similar properties sold/for-sale in last 6 months. It just says that "MOST EMPHASIS WAS PLACED ON THE SALES COMPARISON APPROACH, AS IT BEST REFLECTS THE ACTIONS OF TYPICALLY INFORMED BUYERS AND SELLERS. THE COST APPROACH WAS CONSIDERED SUPPORTIVE"
For me (may be it is just me), it is BS - Since my (informed buyer) comps will become standard for next sale in the area and the balls rolls on. So there is nothing called FACT in appraisal process. If there is a greedy seller or touchy buyer, all the comps could be skewed to an extent that further appraisals are questionable!
Still learning how each involved entity in real estate works...
TRR,
Maybe its easier said then done, but I would push back on the Seller to include the repairs. I understand how they may feel like they "lost 25K" but as you know, the appraisal doesn't actually put 25K back in your pocket. It basically just lets the Bank know you are in the ballpark with your offer and they will fund you. What does your Agent think? In any case, congrats and good luck!
Maybe its easier said then done, but I would push back on the Seller to include the repairs. I understand how they may feel like they "lost 25K" but as you know, the appraisal doesn't actually put 25K back in your pocket. It basically just lets the Bank know you are in the ballpark with your offer and they will fund you. What does your Agent think? In any case, congrats and good luck!
bearman81 said:
bearman81,
True! As a buyer, I would rather have my repair request handled than appraised at more than purchase price (which is not giving me anything right now!). For now, I have prioritized top 3 repair request items and pushed back to seller to get those done, at the least. Oh yeah, my agent congratulated me that appraisal came at 25K+ with no advice on repair request (take it or leave a golden chance was the message, I guess).
irvinehomeowner
Well-known member
The seller doesn't have an excuse even if the appraisal was higher than the contract price... if they want to sell that house they should do the repairs.
If they won't budge, maybe you raise the contract price by ~$1600 to cover it.
If they won't budge, maybe you raise the contract price by ~$1600 to cover it.
Per contract, seller is not bound to do any repairs. However in an equity sale (such as our transaction), seller typically does do some repairs. In this case, they are just installing smoke detectors and leaving everything as is with out warranty.
My (buyer) real estate agent says this is common in most of his transactions! He also says that they have 2 backup offers ready for escrow in case our escrow falls out. Not sure who to believe and how to push back.
I am being stretched being a first-time-buyer, and I am sure it will be the same when I grow into a first-time-seller, 10 years from now!
My (buyer) real estate agent says this is common in most of his transactions! He also says that they have 2 backup offers ready for escrow in case our escrow falls out. Not sure who to believe and how to push back.
I am being stretched being a first-time-buyer, and I am sure it will be the same when I grow into a first-time-seller, 10 years from now!
irvinehomeowner
Well-known member
Usually a 1-year home warranty is paid by the seller... you are not getting that?TustinRanchResident said:
Your agent should be helping you out here... they don't want to lose this transaction either... did you ask him/her for their opinion?
Well, seller is paying for 1 year home warranty (costs $360) per contract.
My RE agent's opinion (in repair request situation) was to take what seller responded to. But since we are in escrow for 2 weeks, most parties involved assume that it is done deal unless loan (where we are good) falls out. These are "minor" things (in their view), but costing me a couple grand.
Contingencies - Loan (done), Home Inspection (done with repair request going back and forth), Preliminary Title (done), HOA (not yet received) and seller disclosure (not yet received).
Your idea of increasing purchase price by $1500 and get that money in loan - its good, but I will still be the responsible person for that money (though bank is giving it to me now, I will be paying for it later). Ideally for buyer, seller should be paying for most of repairs.
My RE agent's opinion (in repair request situation) was to take what seller responded to. But since we are in escrow for 2 weeks, most parties involved assume that it is done deal unless loan (where we are good) falls out. These are "minor" things (in their view), but costing me a couple grand.
Contingencies - Loan (done), Home Inspection (done with repair request going back and forth), Preliminary Title (done), HOA (not yet received) and seller disclosure (not yet received).
Your idea of increasing purchase price by $1500 and get that money in loan - its good, but I will still be the responsible person for that money (though bank is giving it to me now, I will be paying for it later). Ideally for buyer, seller should be paying for most of repairs.
sgip
Well-known member
TRR - I'd not increase the sales price. You're paying for the repairs over time - a great deal of time at that - in both a higher tax rate and mortgage payment. Your loan will have to be re-underwritten etc and that may gum up your closing. As to the second and third offers, that's usually a bluff. Who knows if these mysterious offers are even still interested, can close, or won't have the same issue. That said, given that the price of the home perhaps is lower than close comparables - a fact yet to be settled - there may be some buyers who also saw the value / price discrepancy and made a genuine offer. In this case, the common bluff might be a real deal.
If the seller makes the repairs, whose to say the repairs are going to be done to your satisfaction? I've seen some pretty terrible (I'd use another word, but there are gentle ears listening...) repairs that later became an even greater point of contention right down to the closing table. You may find anyway that these repairs lead to more repairs, or require much greater work than what the seller was willing to do, or that may cost more than what you had in mind to pay post closing! These things can spin out of control fairly quickly pre-closing.
What's unclear is if the lender is requiring these repairs to be done prior to closing. If so, then you may have to eat the cost to close. If the lender is not asking for it to be done, then if this was my deal I'd close and do it myself.
Ask yourself if it's worth blowing the deal over first, then see if you can budget 2x the cost of repairs since everyones estimate is likely low. Since your Realtor is making X, perhaps they will burden share some of the costs.
As to the appraisal statements - those are "plug in" comments that are on every single appraisal. You might find that the comparable photo's used are not "on site" pictures but screen grabs of MLS photos - another common issue with appraisers who are cutting corners. The appraisal is really a collection of data, modified using some standard factors - BR/BA count, time adjustments, condition, as well as some not so common ones like gruff Realtors or nosey sellers hovering over the appraiser when they are at the home. Yes, appraisal values can be influenced by those kinds of factors when you've got a thin skinned appraiser. It's human nature and cannot be removed, unless you have someone completely detached from the transaction. HVCC, the Governments attempt to protect appraisers from blackballing and undue influence, has helped to get appraiser independence back on track. It's a first step that still has some miles ahead of it to be successfully implemented.
My.02c
Soylent Green Is People.
If the seller makes the repairs, whose to say the repairs are going to be done to your satisfaction? I've seen some pretty terrible (I'd use another word, but there are gentle ears listening...) repairs that later became an even greater point of contention right down to the closing table. You may find anyway that these repairs lead to more repairs, or require much greater work than what the seller was willing to do, or that may cost more than what you had in mind to pay post closing! These things can spin out of control fairly quickly pre-closing.
What's unclear is if the lender is requiring these repairs to be done prior to closing. If so, then you may have to eat the cost to close. If the lender is not asking for it to be done, then if this was my deal I'd close and do it myself.
Ask yourself if it's worth blowing the deal over first, then see if you can budget 2x the cost of repairs since everyones estimate is likely low. Since your Realtor is making X, perhaps they will burden share some of the costs.
As to the appraisal statements - those are "plug in" comments that are on every single appraisal. You might find that the comparable photo's used are not "on site" pictures but screen grabs of MLS photos - another common issue with appraisers who are cutting corners. The appraisal is really a collection of data, modified using some standard factors - BR/BA count, time adjustments, condition, as well as some not so common ones like gruff Realtors or nosey sellers hovering over the appraiser when they are at the home. Yes, appraisal values can be influenced by those kinds of factors when you've got a thin skinned appraiser. It's human nature and cannot be removed, unless you have someone completely detached from the transaction. HVCC, the Governments attempt to protect appraisers from blackballing and undue influence, has helped to get appraiser independence back on track. It's a first step that still has some miles ahead of it to be successfully implemented.
My.02c
Soylent Green Is People.
irvinehomeowner
Well-known member
I guess I'm wondering what kind of repairs they are. $1500 doesn't sound like something really major to me but not knowing the repair issues, type of property or contract price... it's hard to determine what the best course is... which is why I recommend talking to your realtor... that's what their commission is for.
And since it's seems you are pretty deep into the escrow (loan contigency done being one of the big hurdles), like SGIP says, changing the contract price is probably not a good idea.
As for appraisals... very subjective. Not sure if I agree with SGIP about having out of state appraisers... having local knowledge helps. Just like those non-locals on the IHB who can't believe what homes are trading at in Irvine... a non-local appraiser could mistakenly apply Phoenix prices here. I say this because I recently had to deal with getting an appraisal redone because the wrong comps were pulled and the person was not very familiar with the area, floorplans or features that affect the values of homes locally.
But again... it depends on what side of the deal you are on... I'm sure the seller would jump at making those repairs had the appraisal come in lower than contract price and you were asking them to reduce the price.
And since it's seems you are pretty deep into the escrow (loan contigency done being one of the big hurdles), like SGIP says, changing the contract price is probably not a good idea.
As for appraisals... very subjective. Not sure if I agree with SGIP about having out of state appraisers... having local knowledge helps. Just like those non-locals on the IHB who can't believe what homes are trading at in Irvine... a non-local appraiser could mistakenly apply Phoenix prices here. I say this because I recently had to deal with getting an appraisal redone because the wrong comps were pulled and the person was not very familiar with the area, floorplans or features that affect the values of homes locally.
But again... it depends on what side of the deal you are on... I'm sure the seller would jump at making those repairs had the appraisal come in lower than contract price and you were asking them to reduce the price.
usctrojancpa
Well-known member
Unless the property is priced at or below comps, I doubt that the property has multiple offers. Sounds like a typical realtard scare tactic to get you worried so you'll move forward with the transaction without them fighting for you to get those repairs taken care of, one way or another.TustinRanchResident said:
usctrojancpa
Well-known member
I totally agree with IHO. If the agent won't fight for you to get the repairs taken care of or get some kind of credit, you should demand that the agent credit you that amount towards your closing costs. Play hard ball with that realtor and tell them that if they don't get the repairs from the seller then you expect them to cover the cost out of their commission (especially if they aren't contributing any commission to you in the first place) and if they don't agree tell them that you'll cancel escrow and go with another agent. You'll have fun watching them tuck their tail between their legs. In my opinion, your realtor is not representing you they way they should be as it sounds like they are only concerned about closing on the transaction and getting paid.irvinehomeowner said:
USCTrojanCPA is spot on. Its not like you really expect even your realtor to be your friend or anything (except for USCTrojanCPA of course!), but they should TRY to do their JOB and atleast advocate for your side. Im not sure how happy your realtor would be if you played hard ball with him at this stage of the game but....
As someone mentioned, in the end, neither of you want to start from scratch on this deal. I think even something like having the costs split between the two of you (seller and buyer) is reasonable atleast. And if that doesnt work, then think of the long term and move on. Its not that big of a deal and Karma will catch up to them later!
As someone mentioned, in the end, neither of you want to start from scratch on this deal. I think even something like having the costs split between the two of you (seller and buyer) is reasonable atleast. And if that doesnt work, then think of the long term and move on. Its not that big of a deal and Karma will catch up to them later!
sgip, compelling response!
Lender is not asking for repairs to be done. These are minor repairs, but safety hazards. I do think appraisal process needs to be straightened for all parties be confident in real estate transaction. It needs to be done in a black-box way.
IHO,
Its a 3CWG SFR in Tustin Ranch. These repairs are as below:
re-gravel flat root (about 20 sq ft area), Insulate outdoor light fixtures, Fix Firewall for water heater, garage door hinge worn out, fire door dead bolt latch, heater and ac function simulataneously, insulation for AC compressor, chimney sweep, kitchen faucet leak, low water flow in water filter, sliding windows/doors are hard to operate, all toilets loose, caulking/sealing in showers, stopper reconnet in sink, leak in shower head, patching 2 holes in drywall.
Timing of appraisal report does not help, as it came right when seller was discussing to fix repair list. Ofcourse, higher appraisal value is not of any benefit to buyer - since we do not plan to sell right away.
USCTrojanCPA,
I have been treating my agent very friendly. I just hope that he is also in with integrity and honesty. As bearman81 mentioned, it may be too late to play hardball. I wish I had visited this forum earlier and got advice from you.
bearman81,
Nice to see your quote on karma! It has put smile on my face
Lender is not asking for repairs to be done. These are minor repairs, but safety hazards. I do think appraisal process needs to be straightened for all parties be confident in real estate transaction. It needs to be done in a black-box way.
IHO,
Its a 3CWG SFR in Tustin Ranch. These repairs are as below:
re-gravel flat root (about 20 sq ft area), Insulate outdoor light fixtures, Fix Firewall for water heater, garage door hinge worn out, fire door dead bolt latch, heater and ac function simulataneously, insulation for AC compressor, chimney sweep, kitchen faucet leak, low water flow in water filter, sliding windows/doors are hard to operate, all toilets loose, caulking/sealing in showers, stopper reconnet in sink, leak in shower head, patching 2 holes in drywall.
Timing of appraisal report does not help, as it came right when seller was discussing to fix repair list. Ofcourse, higher appraisal value is not of any benefit to buyer - since we do not plan to sell right away.
USCTrojanCPA,
I have been treating my agent very friendly. I just hope that he is also in with integrity and honesty. As bearman81 mentioned, it may be too late to play hardball. I wish I had visited this forum earlier and got advice from you.
bearman81,
Nice to see your quote on karma! It has put smile on my face
irvinerealtor
Well-known member
Congratulations, tustinranchresident, and welcome.
If I can add my 0.02c in...
Always remember that the appraisal is solely in place to protect the lender. It really should be immaterial to you, unless you'd like to use it as a negotiating tool later during the transaction. The value of the home should be what you, the buyer, think it is worth (and are willing to pay for). Not one penny more. Over the past couple of years most appraisals that I've seen have been very conservative, as an added protection for the lenders. That is to say, if anything, they will err on the lower valuation of the home, and only lend as a percentage of that lower value. It is another way to force buyers to pay a higher relative %downpayment (less risk of loss for them), or drop the price of the home (also less risk for loss for them).
If the condition of the home is different than what you expected when you made your offer, you have every right to ask for the repairs to be made or ask for a credit to be offered (again, it shouldn't matter where the funds come from, as long as you are paying the price you want).
If the valuation has come back at $25K higher than your agreement price, perhaps your broker has helped negotiate a great deal for you. And maybe, just maybe, you've played it just right by acting with integrity and honesty, as well. As the saying goes, "You can catch more flies with honey than with vinegar."
Congrats again.
-IrvineRealtor
If I can add my 0.02c in...
Always remember that the appraisal is solely in place to protect the lender. It really should be immaterial to you, unless you'd like to use it as a negotiating tool later during the transaction. The value of the home should be what you, the buyer, think it is worth (and are willing to pay for). Not one penny more. Over the past couple of years most appraisals that I've seen have been very conservative, as an added protection for the lenders. That is to say, if anything, they will err on the lower valuation of the home, and only lend as a percentage of that lower value. It is another way to force buyers to pay a higher relative %downpayment (less risk of loss for them), or drop the price of the home (also less risk for loss for them).
If the condition of the home is different than what you expected when you made your offer, you have every right to ask for the repairs to be made or ask for a credit to be offered (again, it shouldn't matter where the funds come from, as long as you are paying the price you want).
If the valuation has come back at $25K higher than your agreement price, perhaps your broker has helped negotiate a great deal for you. And maybe, just maybe, you've played it just right by acting with integrity and honesty, as well. As the saying goes, "You can catch more flies with honey than with vinegar."
Congrats again.
-IrvineRealtor
irvinehomeowner
Well-known member
Half of the list sounds minor but maybe a few sound like they should be done for safety reasons (not being a realtor or architect... I'm not sure).
If it's a 3CWG (jealous!) then the price point is pretty high and $1500 seems like a very small percentage and you may just think about doing it yourself. But I would re-ask the realtor... maybe there is some middle ground you can meet on (like I would not push on the drywall, caulking/etc minor non-safety stuff).
Good luck and let us know what happens.
If it's a 3CWG (jealous!) then the price point is pretty high and $1500 seems like a very small percentage and you may just think about doing it yourself. But I would re-ask the realtor... maybe there is some middle ground you can meet on (like I would not push on the drywall, caulking/etc minor non-safety stuff).
Good luck and let us know what happens.
Thanks IR and IHO.
I have sent top#3 items (A/C, Garage door hinge and chimney sweep - may cost ~$400) for seller, which is being reviewed. I am requesting my agent to consider next 5 items that are critical for safety (that may cost ~$800).
For repairs, it is both money and fear-of-unknown that is bugging me as a first time home buyer. Hopefully that will all go away after first 3 months in the house
I have sent top#3 items (A/C, Garage door hinge and chimney sweep - may cost ~$400) for seller, which is being reviewed. I am requesting my agent to consider next 5 items that are critical for safety (that may cost ~$800).
For repairs, it is both money and fear-of-unknown that is bugging me as a first time home buyer. Hopefully that will all go away after first 3 months in the house
Gentleman, I have 2 questions :
Repairs - Sellers agreed to do 3 items (out of 12) and my agent mentioned he will get handyman get the estimates for the rest of them and "if it is not too much", he can get them done but only "after" closing. Is it normal? Should I remove contingencies?
Final Walk Through - is scheduled next week. Any ideas on what I will need to look for?
Appreciate your replies.
Repairs - Sellers agreed to do 3 items (out of 12) and my agent mentioned he will get handyman get the estimates for the rest of them and "if it is not too much", he can get them done but only "after" closing. Is it normal? Should I remove contingencies?
Final Walk Through - is scheduled next week. Any ideas on what I will need to look for?
Appreciate your replies.