dealing with too high appraisals

When Is a Sacramento Seller Entitled to Receive the Buyer’s Appraisal?

buyer's appraisal

Under most instances, a home seller is not entitled to receive the buyer’s appraisal.

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.

Subscribe to Elizabeth Weintraub\'s Blog via email