Just off the top of your head, Ms. Realtor what do you tell me what my house is worth? This is a question that so many people ask. Here is the answer. How can I know what a house is worth off the top of my head? An asset that is worth several hundreds of thousands of dollars or more can just be evaluated in an instant?
The fact that an appraiser comes out and measures your house takes photos inside and out. Then often a lengthy evaluation report of data is completed and a narrative study about the market. The appraiser uses the subject property and interprets data with comparable sales, upgrades and improvements. Other factors can be deferred maintenance and neighborhood factors. If an appraiser is doing 6 appraisals a week, then an appraisal can take 8 hours to complete.
Over improvement in a home can also be a negative factor. A seller looks at how much money they have invested. The problem is this if in an area the highest sale is $ 499,000. The 2500 square footage is the highest and the subject is larger with many upgrades. Then the owner feels the extra square footage should be priced at the overall square foot price.
The upgrades and improvements should conform to the area. The extra footage is not generally calculated that way. The extra footage may be about $75 per foot; this is what I have seen in the last 3 appraisals. This $75 is an estimate only as it could be lower or higher. If the most expensive property in an area is 3000 square foot and the subject is 4000 square foot that extra 1000 feet may be priced lower than the 3000 per square foot price example.
The idea here is to be concerned of anyone tells you they can give you an instant evaluation value. Some online services give an instant analysis however that evaluation is often off by quite a bit. Always ask to see the actual evaluation worksheets. Just off the top of your head, what do you think my house is worth? Ok, I can’t give you an accurate professional answer.
- – JaCi Wallace
Is meeting a real estate appraiser at the property important for a listing agent? This Sacramento Realtor thinks so. Yesterday, I had a call from an appraiser. He was requesting access to a pending East Sacramento listing of the Weintraub & Wallace team at RE/MAX Gold. We met yesterday at 11:00 AM.
In fact, after offer acceptance, I had changed the access notes in MLS to appointment only. This ensures the appraiser does not make entry without my attendance. The reason for this is so that I can ensure he has comparable sales to support the sales price. Additionally, it gave me the opportunity to provide a list of upgrades and replacement dates of systems such as heat/air, roof, and sewer.
Now, the fact we had multiple offers on the property was indicated in MLS, but not every appraiser believes that should afford a price well over the list price. I prepared a market analysis showing sales in the area, attached to the list of upgrades that I gave the appraiser. It is never a guarantee of appraisal value, to offer information to an appraiser, and meeting the real estate appraiser at the property doesn’t always turn out the way we want. However, ask yourself if the above actions are important, rather than just letting the appraiser use the lockbox with no information whatsoever?
As a top producer, we always go above and beyond the typical service level. Our seller lives out of state and has put his faith in us to act on his behalf. We put his interests above our own. Not only do we believe this is important for out of state sellers but for every seller, even if right next door!
Most of the time, we find that meeting the real estate appraiser at the property is a good idea. You now have enough information to decide for yourself. Don’t guess with your real estate sale, call Weintraub & Wallace Realtors today at 916-233-6759!
— JaCi Wallace
Why do appraisals rarely exceed the sales price in Sacramento? In fact, I know that sellers definitely want to know: why do appraisals come in at the value anyway? Seems rigged. Good questions. Although it is also rare to meet that goofy kind of buyer who says, I thought the home would appraise way over list price, and since it does not exceed the sales price, I don’t want to buy it. Those kind of buyers are out there. A Sacramento listing agent does not really know what buyers are thinking when they make an offer to buy a home, but after years go by, it gets easier to guess.
Further, appraisals rarely exceed the sales price because that could result in a non-conforming appraisal. Wha, you exclaim? How that can be? Wouldn’t the lender be happy with a lower loan-to-value ratio? No, the answer is no. The only values a lender will consider is the sales price, if it’s lower, or the appraisal, if it’s lower. Whichever is lower. In addition, an underwriter might think something is wrong with a home that appraises for a lot more than its sales price. Because that would be weird.
I know buyers often think they know more about the market than the agents who work in those markets or the sellers who live in those neighborhoods. Don’t get me wrong, buyers are very knowledgable, but they generally don’t know more than professionals in the industry. Because experienced Sacramento Realtors know that if you list a home too low, buyers will bid up that price. It’s virtually impossible to sell a home for less than market value when that home has been exposed for a long period of time to a wide pool of buyers.
Generally, since appraisals rarely exceed the sales price, appraisals tend to come in right at the sales price or sometimes lower. A lower value would result in a low appraisal, and those do happen. Buyers get overly excited and bid up prices above the price at which the home will appraise. Because appraisals are based on comparable sales. Not market. In those cases, buyers either pay the difference or sellers lower the price. Buyers usually do not cancel. Instead, they are generally very excited.
It is rare for a seller to lower the price after a low appraisal and then have a buyer demand a deeper price cut. I know. Nuts, right? But I have witnessed buyers try to do exactly that. Makes a person wonder what they’re smoking. Their reasoning is they thought they were getting a deal when the seller discounted the price and accepted their offer. Now if it appraises at a bit less, buyers may have lost enthusiasm for the house they claim to love.
They probably imagined they were getting a smokin’ deal. Pulling the wool over everybody’s eyes. Which meant the contract was probably signed in bad faith. Have you ever heard of a buyer leaning toward cancellation because the appraisal was too low? Sellers, yes, but buyers?
Some buyers also don’t realize an appraisal is only one person’s opinion. It is not a fact. Not etched in gold.
Just when you think you’ve seen it all, there is always some new fresh hell on the horizon to let you know that you will never see it all. Even after 44 years in the business, there is always new crap.
Well, Sacramento appraisers are not gonna like this blog, I can tell you, but I think agents will find it interesting. Let’s say, for example, that there are two different listing agents at Lyon Real Estate. Both of these agents list identical condos. Same square footage, same type of location, similar amenities, and identical sales price. The first condo sells at list price. Shortly after that condo status changes to pending, the second condo comes on the market and that seller goes pending in 3 days. We later discover it went pending at a lower price than the first condo. I know, sounds strange and peculiar that the seller accepted a lower price. Especially after only 3 days on the market.
In any case, fast forward to the first condo is getting ready to close escrow. The appraiser goes over to appraise that sale. The appraiser then calls the other Lyon agent and asks this agent to disclose confidential information about the pending sale. The second Lyon agent, not thinking probably, blurts out the condo sold for less than list price. Shares the exact price. Due to limited inventory, the appraiser uses this pending sale as a comp and discounts the appraisal for the first condo seller. Yup, one could reasonably conclude that the appraisal came in low because a Lyon agent blabbed.
Two condos. Same company. Lyon Real Estate is a huge company in Sacramento. 17 offices and almost 1,000 agents. The likelihood of this scenario happening is very high. So likely that it did happen.
Let’s just say I am not that second agent. For one thing, I would suggest to a seller that she counter a lower offer like that. Especially when the condos sell so quickly in a hot market. But I’m not privy to that second contract or transaction so I have no idea, really, what went down. Do not mean to point fingers.
But I do know this situation has opened my eyes. Especially concerning dual representation of more than one seller. From now on, helping out Sacramento appraisers by providing more information than they are really entitled to know could be a very bad move. I suppose I could ask Sacramento appraisers if their transaction involved a Lyon agent on either the selling or buying side and then refuse to disclose. But it seems to make more sense not to disclose any confidential information that could affect a sale or harm other parties.
Sacramento appraisers can find everything they need to know in MLS and at the County Recorder’s Office. Good risk management says it’s wise to limited exposure to potential lawsuits.
My basic method of operation is not to worry too much about the buyer’s appraisal when I list Sacramento condos in our hot seller’s market. In other words, I don’t always base the sales price on how much the home will appraise for as much as I suggest a price based on what the market will bear. Meaning, what a buyer will pay. Especially a buyer who might have a big ol’ wad of cash at her disposal. Buyers who don’t need financing can pay whatever the seller will accept.
Condos tend to command lower prices than single-family homes, sometimes as much as 50% less. This means they make a good investment for some investors. Investors often pay cash. So do many 1031 exchange investors. No buyer’s appraisal with these kind of buyers.
Consider a condo I sold in the Arden area a while back. A still slightly underwater condo. Priced it high enough and marketed it in such a way to attract multiple offers. Every top listing agent’s dream. We hoped a buyer would pay cash, and could push the price even higher. That happened. I changed the financing terms to cash. No loans.
But today’s market also includes buyers with financing. Sometimes the buyer’s appraisal will come in at the sales price, even if we can’t find decent comps. The appraiser finds a way. But not all appraisers go to such lengths, and available comps within a 2 mile radius to support the sales price might not exist in this market.
Not surprisingly, a low appraisal allows the seller to receive a copy of the buyer’s appraisal. When the appraised value does not support our pending sales price. Otherwise, if the home appraises for more than the sales price, which is unlikely, the seller would never know.
Unless . . . there is always a big UNLESS. Unless it’s pertinent to the sale. That’s a kicker for ya. Last month a buyer’s appraisal showed different square footage than the number in the public records. It was higher. So, I asked the agent for the appraisal. Turns out the home appraised for more than our sales price due to the increased square footage.
Da-da-DAAAAA. Long-story-short. The buyer paid the higher price.
Of interest to note: the seller is entitled to all reports and inspections a buyer pays for during escrow. Except for the buyer’s appraisal. The seller is generally not entitled to receive the appraisal. Except under limited conditions.