conventional appraisal

How Do Sacramento Appraisals Work?

People think Sacramento appraisals are etched in stone, but that kind of thinking is flawed. Appraisals represent an opinion of value. Get 10 appraisers together in a room, and you’ll have 10 opinions of value, and some of them will undoubtedly be worthless. But that doesn’t stop people from thinking their home in Sacramento is worth a certain value because the appraiser said so or the agent said so.

Market value is that price at which a seller is willing to sell and an able buyer is willing to buy. It’s when you throw a lender into the mix that appraisals come into play. This is a reason sellers tend to prefer cash buyers. When you throw an appraiser into the transaction, it’s not unusual for market value to vanish — poof! The appraisal is for the lender, to protect the lender’s security; it’s not for the buyer, even though the buyer pays for it.

I closed a Sacramento short sale transaction this month in which we had 2 appraisals. The first was ordered by the mortgage lender by mistake. It was a conventional appraisal, not an FHA appraisal, and there is a difference between the two. The conventional appraisal came in at, oh, let’s say $200,000. The problem was the buyer had applied for an FHA loan, not a conventional loan and did not qualify for a conventional loan. So, the buyer could not use the $200,000 appraisal for her loan.

Enter the FHA appraiser. Her appraised value was, oh, let’s say $180,000. Yup, a $20,000 difference. Which appraiser was right? They were both right, if you can believe that. Because this transaction was a short sale, though, the short sale bank had plenty to say about that FHA appraisal at $180,000. The bank had approved a sales price of $200,000. It would not agree to let the seller sell at $180,000. We supplied comparable sales and argued, but in the end, the bank agreed to, let’s say $195,000. The buyer had to pay the difference of $5,000.

How much was that home in Sacramento worth? It was worth $200,000 to the buyer. The buyer always has the last word. If you’re thinking about listing your home in Sacramento, hire the best Sacramento real estate agent you can find. Because you want somebody on your side, not just the agent who will promise the highest sales price. Agents will list at whatever price a seller wants. The agent doesn’t choose the price. And the seller doesn’t, either. It’s the buyer.


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