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The appraisal value

Something is only worth what someone is willing to pay for it. Regardless of what the county assessor, appraiser, seller, neighbor, or realtor believe the property is worth, the market will always dictate what a property’s true value is.
A property priced a little below perceived market value may get multiple offers on it causing the consumer to over bid the list price. This may occur because there is not another optimal choice that could be substituted. Perhaps there are low inventories and demand is high causing a buyer to believe the property will increase in value sharply enough over the upcoming months to justify the value they are placing on the property.
A property priced too high will generally sit on the market for a longer period of time than one priced correctly. It may be perceived by the market place to have something wrong with it, since it has not sold in a timely fashion.
Most buyers want to know how long a property has been on the market and if there have been any price changes prior to making an offer. The longer it has been on the market the lower they seem to want to make the offer, or the more confident they feel in asking for concessions.
An appraiser looks at comps for a house in order to make a determination for the bank that the buyer is purchasing the home at fair market value. Since the bank is using the property as collateral, the bank uses the appraisal to justify making the loan. An appraiser is using comparables that have sold within the last 3-6 months. If the market is decreasing, the value of the bank’s collateral will decrease with the market and the appraiser may be inclined to be conservative with values. While in an increasing market the appraiser cannot predict where the market is headed, they can only base value on the sold properties. This will sometimes cause a difference in what an appraiser believes the value of the property to be in relation to a buyer.
I have had buyers who know they are getting a good deal on a property become a little remiss that the appraiser did not value their property higher than they did on the report. But remember, the appraiser is working for the lender to determine whether the collateral has enough value for the lender make the loan. And in an appraiser’s mind, if the property was worth more, in an arms length transaction, the buyer would have paid more.
If you have questions regarding real estate, please feel free to contact me at 405-213-2992 or visit my website at http://www.sandiwalker.com

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Real Estate

The cost of low supply

I recently took a trip to Napa Valley California for a long weekend. While I was there I spoke with a few realtors regarding their market. It was interesting to learn what a difference a year makes.
The realtors I spoke with said that in the last year, the sales prices had risen 20% while the inventory had declined. One realtor told me they only had a 21 day supply of inventory in the county. Meaning that if no other houses came on the market all the properties currently on the market would be sold in 21 days. A stable market where neither buyer nor seller have an advantage is estimated at a 6 month supply and a 4 month supply is usually deemed a sellers market.
Continuing my conversation with these realtors I learned that it is not uncommon for a property to have 10-15 offers on it. And they have seen 50 offers on several properties. When you have that many offers on a property, a lot of people tend to bid over the list price in order to win the bid. So my next question of course was, what about appraisals. It is great that someone wants a house so bad that they are willing to bid $10,000-$20,000 over list price but can they get an appraisal. All of the realtors told me that many buyers are waiving the appraisal requirement. WHAT?
The buyers are in essence saying they know the appraiser is looking backwards at what property has sold for in the past few months and making a determination of value. However, they believe the market is moving upward so fast do to low supply that the house is worth more than the appraiser is valuing the property. Therefore they are willing to pay over the appraised price.
Because there are more buyers than sellers and the demand for housing is increasing while the supply of available properties is low, the prices are moving upward and fast, and will continue until more sellers enter the market and equalize the demand and supply ratios. The principle of supply and demand demonstrated in the real estate market.
If you have questions regarding real estate, please feel free to contact me at 405-213-2992 or visit my website at http://www.sandiwalker.net