real estate appraisals

[brownthumb]

Unbelievable. I am in the process of selling my rural home to a relative. I paid for 2 different licensed real estate appraisals and one came in at $340,000 and the other came in at $450,000. Both of these cost me $325 and I felt the first one was way too low but the second one was a bit high also. My personal opinion is that the place is worth $400,000 to $420,000. What is fair?

[Jennifer L.]

I've had only one appraisal done ever, so I don't know much about them, but it might make a difference which way the appraisers were looking at the property. For example, one might have been looking at it as farmland, the other as development property.

Jennifer

[botebum]

Appraisals are based on equivalent homes/properties in the same area and what they sold for recently. Your appraisal should include 3 of these which should be identified on the appraisal. It's not that uncommon for the definitions of "same area" and "equivalent" to be fairly broad. Check out the comparable propeties and make a decision based on the accuracy of those as comparable or not.

Doug

[Alice In TX/MO]

*Tax* appraisals are based on comparable properties. Real estate appraisals may or may not be.

[Dutchie]

While it is not unusual to have appraisals arrive at different opinions of Market Value, a spead of $110,000 is way too much. A spread of 5%-10% is more acceptable.

Did you pick these appraisers yourself? What did you base your choices on? And what were your instructions to the appraisers --- what was their Scope of Work? What is your zoning and how much land do you have?

[Dutchie]

Originally Posted by Rose

*Tax* appraisals are based on comparable properties. Real estate appraisals may or may not be.

They are. The opinion of market value is based on comparable sales. (Although there are instances where there are no comparable sales available and then other methods are used).

[The Paw]

Arithmetically, the average is $395,000 so if you feel it is higher than that, you should be able to justify why. As Botebum suggests, a closer look at the comparables may give you a clue as to why the two appraisers differed.

Lenders usually like appraisers who are certified by an appropriate body, so if both the appraisers have the same certification, they should be using the same methodology. Having said that, there is always an element of interpretation, and for $350 they are likely only spending a couple of hours on it, so some variation is to be expected.

My choice would be to make both appraisals available to the relative, and explain why I set the price at a certain level. With all info on the table, you don't run the risk of the relative hearing about the lower appraisal later on and feeling they got screwed. Your mileage may vary...

[Dutchie]

Originally Posted by The Paw

Arithmetically, the average is $395,000 so if you feel it is higher than that, you should be able to justify why. As Botebum suggests, a closer look at the comparables may give you a clue as to why the two appraisers differed.

Lenders usually like appraisers who are certified by an appropriate body, so if both the appraisers have the same certification, they should be using the same methodology. Having said that, there is always an element of interpretation, and for $350 they are likely only spending a couple of hours on it, so some variation is to be expected.

My choice would be to make both appraisals available to the relative, and explain why I set the price at a certain level. With all info on the table, you don't run the risk of the relative hearing about the lower appraisal later on and feeling they got screwed. Your mileage may vary...

Averaging is not done.

A professional appraiser spends considerably more than just a couple of hours on an appraisal. And if they underestimated the job, they should still deliver a properly researched and analysed report.

And we all use the same methods, depending on the Scope of Work, regardless on the license level.

A better solution would be to have the buyer pay a Review Appraiser to do a review on both. Let me know if you'd like some help finding a competent appraiser .... I know several in PA.

[sugarbush]

If a financing company is involved they will go with the lower one and refuse to loan any more money on it than that, or they will send their own appraiser out to do another one.

[Wolf mom]

Go back to each appraiser and ask them why the difference & to explain how they arrived at the value & why they used those comparables as opposed to others & also how far away did they go for the comaparables.

You paid good money. They owe you an explanation. Expecially since they should be licensed. Hopefully they each will give you a plausable explanation.

Bank appraisals are usually lower than a refinance appraisal. What did you ask for?

[brownthumb]

There are 5 acres and a 7 year old home. Both appraisers are certified. Appraiser #1 used 3 comparables but all 3 were in the same school district. The homes were not very similar to mine and many adjustments were done to reflect different acreages and home sizes. Appraiser #2 used 4 comparables that are all very similar to mine and within a 5 mile radius but involved crossing lines to other school districts. The property is in an area where 3 counties join together and the repsective school districts are all very similar in quality. The tax base of all counties are relatively similar maybe within + or - 10%.
I am wondering why the huge disparity but I honestly feel the low ball appraisal is really out of whack despite the school district. The low ball appraiser told me verbally he thought my home was worth $400,000 until after his "computer" generated report.
I have already paid him but felt I didn't get a good report. He was from the city and didn't know the area very well. The Appraiser #2 is from my own area.
I am sure I can't get my money back from these appraisers but what am I to do now?
This is ridiculous. I feel like complaining but it probably won't do much good.

[Triffin]

My personal opinion is that the place is worth $400,000 to $420,000. What is fair?

You just answered your own question ..
Your personal opinion is all that matters ..
Unless your buyer is paying all cash, their
lender will get their own appraisal on your place ..

Triff ..

[Maura]

If you feel that your property was more properly appraised by the higher appraisal, then use that when presenting your price of $420,00 ("But I'm willing to go $400,000 since we aren't using a real estate agent"). If the buyer thinks it is too high, he can pay to have another appraisal done.

[Wolf mom]

second thought: Why did you have an appraisal done in the first place?

All that was needed was a call to a realtor who would have given you comparables in the area - the length of time it to sell, and the current homes on the market in the same price range.

When the buyer goes to get a mortgage, another appraisal will be done by the banks staff appraiser, unless one of your appraisers was on their approved list.

PS an appraisal is only good for 6 months...

[Silvercreek Farmer]

You should report the appraisers to the appraisal board and let them investigate, they may find that one or both appraisers are out of line, if they in fact did a good job there should be no problem.

[donsgal]

Originally Posted by brownthumb

Unbelievable. I am in the process of selling my rural home to a relative. I paid for 2 different licensed real estate appraisals and one came in at $340,000 and the other came in at $450,000. Both of these cost me $325 and I felt the first one was way too low but the second one was a bit high also. My personal opinion is that the place is worth $400,000 to $420,000. What is fair?

Licensed real estate agents and licensed appraisers are two different things. (At least in Missouri. Pennsylvania may be different).

In Missouri, real estate agents only do a Comparitive Market Analysis based on similar houses which have sold. They do not do a full appraisal to determine the market value of a home. Now again, your real estate agents may have done the full appraisal I don't know, but I do know that they have a vested interest in the final result (hoping that you will choose them for their listing agent). And independent appraiser will not have this bias when doing a full appraisal on your house.

If you are truly wanting an appraisal and not just an "educated guess" then I would suggest plunking down the $200+ to hire a certified/licensed appraiser. Otherwise, just use the information you have take a stab at listing the house for what you think it is worth and go from there.

donsgal

[Wolf mom]

Yes, an appraiser is different from a real estate agent -

the thing is that an appraisal is based on cost value, a comparative market value and something else that I forget.

Cost value and comparative market value can be different depending upon the market, that I'm not going to get into here.

Most people go by comparative market value (part of an appraisal - read prior posts) when they go to sell a house/land which a realtor can supply.

As far as the realtor wanting your business, again yes, but they have to be realistic in guiding you to an asking price or the house/land won't sell. All the comparable figures are in front of the seller to make an informed decision. A good realtor would not tell you what to sell the house for or they set themselves up for a law siut if it does not sell at that price.

[Macybaby]

We had our WI house appraised for a refi. The house was on the market at the time for $320,000. Realtor had come up with $350,000 but I think she was only trying to get the listing.

When appraiser came out, he said 300-320, but then said if he appraised it on the high end, and it did not sell for that, we could sue him over it. He asked what we needed, and we needed the house to come out at $275,000 to keep the bank happy, and that is what the appraisor came up with.

We sold the house at $290,000 and that is what the buyer's bank appraiser came up with.

We had a 4 year old home on 40 acres. Pretty much no comps (with recent sales) within like 20 miles, so very hard to appraise.

Cathy

[SteveD(TX)]

Wow I've learned a lot from this thread.

Funny considering that I've been a r.e. appraiser for 24 years and used to teach college level appraisal courses.

[chris30523]

Ask what you think it is worth. The buyer should get an appraisal to get a loan .If it doesn't appraise out and he still wants it he can come up with the difference in cash.