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Appraisal
Basics
Appraisal
Methods
When To Order an
Appraisal
Appraisal To
Establish Home Market Price
Appraisal To Obtain A
Loan
Helping The Appraiser
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Appraisal To
Establish Home Market Price
In the real world, very few
individuals order appraisal reports to establish
an offering price or to substantiate a purchase
price. At the point that an offer to purchase (in
a typical residential transaction) is made, the
price has been set by other parties, not the
purchaser. The price has been determined by the
seller, who wishes to obtain the highest price
possible, or the agent, who receives a percentage
of the price as compensation and often represents
the seller in the transaction.
The real
estate agent will typically perform a comparative
market analysis (CMA). The appraisal laws in most
states allow real estate agents to perform CMAs
without an appraiser's license or certification. A
CMA is a necessary part of the agent's preparation
for a listing and consists of examining sales of
properties in the area to arrive at a listing
price. The reliability of the CMA depends upon the
agent's experience and the characteristics of the
property. The agent will suggest a selling price
to the seller based upon the analysis. However,
neither the seller nor the agent are bound by the
results of the analysis, and the agent is not
required to follow any formal procedure in
completing the CMA. If a seller wishes to list the
property at a price higher than the price
suggested by the agent, then the agent may be
forced to accept the listing at that price or risk
losing a commission.
Purchasers believe
that they are getting a good deal if they make an
offer lower than the listed price. But how far
above the market value was the property listed?
10%, 15%, maybe even 20% above the fair market
value? A negotiated price of 10% less than the
listed price on a property that was listed at 20%
above its value is not a bargain. The agent cannot
tell the purchaser that the offered price is
higher than the value, or even higher than their
own CMA. In most states, they must submit the
offer to the seller.
The seller of a
property may want to order an appraisal before
listing the property. Of course, the cost of the
appraisal is always a deterrent, especially if the
seller knows that a buyer will pay for it when
applying for a loan. But the appraisal is often
justified. The seller could lose a sale if the
property appraised for less than the sale price
when appraised by the appraiser.
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