Buying Your Home - Appraisals & Market Value
Below are some general thoughts about Appraisals.
However, first a few words about appraisals in Big Bear Valley. As you know Lenders and Banks want to know that a home is worth the amount of money they will loan against. Banks will send an Appraiser to the property to measure the home, look at it's condition, and compare it against similar home sales. Big Bear is a "mountaintop community" and the weather/building considerations are different from "down-the-hill" properties... therefore, we want to make sure that the Appraiser that evaluates a property is "geographically qualified" to evaluate Big Bear homes. If the Appraiser doesn't have mountaintop experience, then we will challenge his/her opinion.
What to do if the Appraisal amount doesn't meet the Contract price. Let's say that the buyer and seller agree to a purchase price of $200k, but the appraisal comes in at $190k. There is a $10k difference between what the bank will loan and the "contract price". There are several options in this case. 1) the buyer can kick in $10k being cautious that taking $10k out of savings may upset the "ratios" that the bank uses to approve the loan, 2) the seller can come down in the asking price by $10k, 3) a combination of the first two, 4) call for another appraisal, or 5) the buyer can walk away from the deal (one of the standard buyer contingencies is an Appraisal Contingency.)
What's a house worth?
The key here is that neither the Seller nor the listing Agent sets "Market Value"... the market set market value. A home ultimately is worth what
someone will pay for it. Everything else is an estimate of value. To determine a
property's value, most people turn to either an appraisal or a comparative
market analysis (CMA). An appraisal is a certified appraiser's estimate of the value
of a home at a given point in time. Appraisers consider square footage,
construction quality, design, floor plan, neighborhood and availability of
transportation, shopping and schools. Appraisers also take lot size, topography,
view and landscaping into account. Most appraisals cost about $300. A
comparative market analysis is a real estate broker's or agent's informal
estimate of a home's market value, based on sales of comparable homes in a
neighborhood. Most agents will give you a comparative market analysis for free.
You can do your own cost comparison by looking up recent sales of comparable
properties in public records. These records are available at local recorder or
assessor offices, through private real estate information companies or on the
I find out the value of my home through the Internet?
You can get some
idea of your home's value by searching the Internet. One website, Zillow, will render an estimate that is based on an AVM software evaluation (Automated Valuation Model). However, beware! That estimate, and others that use the AVM formula, can be wildly wrong. Here is the problem... if you are a Seller and you set your expectations via the AVM estimate, you could be leaving money on the table... AVM says $325k, but the actual market value may be $375k. AVM models depend on historic home sales
records to calculate the estimate. This service doesn't produce official
appraisals, and often the estimate will be a very wide range of prices. They also don't factor in market nuances or other issues a certified
appraiser or real estate professional might in assessing the value of your
home. For more information on AVMs, please check the "Sellers" tab in this website and select "What is an AVM".
What is the difference between list price, sales price and
The list price is a seller's advertised price, a figure
that usually is only a rough estimate of what the seller wants to get. Sellers
can price high, low or close to what they hope to get. To judge whether the list
price is a fair one, be sure to consult your agent for comparable sales prices in the area. The
sales price is the amount of money you as a buyer would pay for a property. The
appraisal value is a certified appraiser's estimate of the worth of a property,
and is based on comparable sales, the condition of the property and numerous
other factors. By the way, your bank/lender won't accept another bank's appraisal, so be careful when using existing appraisals.
What are the standard ways of finding out how much a
home is worth?
A comparative market analysis and an appraisal are the
standard methods for determining a home's value. I will be
happy to provide a comparative market analysis, an informal estimate of value
based on comparable sales in the neighborhood. I will provide you with listing prices of
current homes on the market as well as those that have sold. You also can
research this yourself by checking on recent sales in public records, but that won't always tell the real story behind the sold price. Be sure
that you are researching properties that are similar in size, construction and
appraisal, which generally costs $300 to $500 to perform, is a certified
appraiser's opinion of the value of a home at any given time. Appraisers review
numerous factors including recent comparable sales, location, square footage and
How do you determine the value of a troubled
Buyers considering a foreclosure property should obtain as much
information as possible from the lender, including the range of bids expected.
It also is important to examine the property. If you are unable to get into a
foreclosure property, check with surrounding neighbors about the property's
condition. It also is possible to do your own cost comparison through
researching comparable properties recorded at local county recorder's and
assessor's offices, or through Internet sites specializing in property
What is the difference between market value and appraised
The appraised value of a house is a certified appraiser's opinion
of the worth of a home at a given point in time. Lenders require appraisals as
part of the loan application process; fees range from $300 to $500. Market
value is what price the house will bring at a given point in time. A comparative
market analysis (CMA) is an informal estimate of market value, based on sales of
comparable properties, performed by a real estate agent or broker. Either an
appraisal or a comparative market analysis is the most accurate way to determine
what your home is worth.