real estate appraisals

Any property is only worth what someone else is willing to pay for it. No more.

When we were selling our house, the appraisal came back very low. We questioned our RE agent so he gave us the addresses of the comps listed (he couldn't believe it either). One had half the acreage, decent house, but miles back a gravel road. The other had slightly more land, the house was uninhabitable and trashed (junked rusty cars, etc.) The funny thing is our house appraised for exactly $500 more than the loan amount the buyers were getting. I'm sure there was a conversation similar to yours about "how much do you need it to appraise for"

The appraisor also said that the whole house needed rewired because he only saw the (new) fuse box in the basement with four circuts, he never asked if there was another box (the main is in my dining room behind a picture) This was after the home inspector said it was one of the best built 60 yo homes he has ever seen.

Anyway, that canned our idea of selling.

Not necessarily true! Consider an example of a $250,000 home listing, where the first offer is for a ridiculously lowball offer of $100,000?

Then of course there are instances of 'eminent domain', and also 'tax foreclosures'.

I'd give 50 bucks, sight unseen.

That said, there is an assumption that both the buyers and sellers are serious. Market value actually is described as involving a "willing buyer and willing seller", and "most probable price".

What about "eminent domain" and "tax foreclosures"? The first involves "fair market value". And often the final purchase price is above that. The second may or may not.

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Society has gotten to the point where everybody has a right, but nobody has a responsibility.

Me too, Steve. Think I ought to use this thread as study material for my upgrade?

OK - I have a question for you guys who are appraisers.

We have good friends who thought about moving to Mexico two years ago. They paid to have their place appraised, and it came out to $250,000. They only have 10 acres, but it is on the river and has a very nice house.

Last year an oval, dirt, racetrack went in on the adjoining property. It is.......just roughly estimating.......500 yards from their house. The race track is UGLY and LOUD.

They had an appraiser (state certified or whatever the proper term is) come out and appraise it last month and he said it was only worth $50,000 because of the race track. They are trying to appeal their property taxes, based on the new appraisal. The appraiser says the county HAS to accept his appraisal value because he is certified or licensed or whatever. But the county is fighting it and claiming the place is still worth 250,000 whether the race track is next door or not.

Well?

Years ago I would hear experts in the real estate field explain what a particular piece of real estate is "worth" is what a buyer is willing to pay and a seller is willing to accept.

That sounds much closer to reality.

SOLD! To the highest bidder!
Now where am I going to put poor Fido?

You do know what they say about "assuming", don't you?
If you've ever sold a home through a realtor, you surely must have seen some ridiculously low offers! I know I have!

Yes, but as we've seen clearly on this thread, two different appraisers doing the same property are over $100,000 apart as to what they think fair market value is. So who really decides what is fair, except the seller through willful acceptance?

I understand what you are trying to say, but surely you are not suggesting that fair market value always applies in these situations? Have there ever been eminent domain cases where the property owner literally got the royal shaft?
Furthermore, how can a "fair market value" be placed on forcing somebody off their property unwillingly through no fault of their own???????? What is the fair market value of having something of great value literally taken away by force?

My responses in blue!

Your mileage may vary, (but you're paying for your own gas).

The first thing they teach you when going for your r.e. salesman license (forgive me, it's been 25 years): All estates in real property are subject to four powers of government; taxation, eminent domain, police power and escheat.

Some people obviously have no idea what they are getting into when they buy real estate. Absolute ownership free from government control does not exist.

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Society has gotten to the point where everybody has a right, but nobody has a responsibility.

KCM wrote:

As I said before, there is something wrong when 2 appraisals come in with more than a 5% difference. One of them is not right and I suggest the buyer and/or the seller either have a third appraisal done or have them both reviewed by a competent appraiser.

I don't do much residential anymore, but do review work for a couple of banks. At one time, I owned a shop with 4 residential guys and 2 commercial guys full time, plus another 3 or 4 outside contractors. We were doing 5 or 6 relos a week plus 8-10 Freddie Mac appraisals, in addition to mortgage work.

Rural appraisals are the hardest, due to difficulties in adjusting for land values, availability of water/utilities, quality of wells, school districts, etc.. A 5% spread is ideal but it's not uncommon to see a much wider range. Now a $100,000 spread is highly unusual. But yes, it happens. After all, an appraisal is one person's opinion. Appraiser's don't walk on water, and most reports are subjective. At one time years ago, market value was defined as "highest price....". Now, it's "most probable price...". The change created some turmoil in the industry and wider ranges in value.

Someone mentioned $200 for an appraisal. Here, $350 is average in town and $500-600 for rural with more than an acre or so. My commercial appraisals average $3000 and go up to $10,000.

And Dutchie: Of COURSE we average. We just don't admit it.

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Society has gotten to the point where everybody has a right, but nobody has a responsibility.

I think you said what I was getting at, but you did it much better.

About 15 or so years ago, I was working on a pilot program for low income inner city home ownership here in Canada. CMHC (govt agency that insures mortgages) stipulated a 10% down payment, but had an obscure policy built around sweat equity improvements. Long story short, we talked them into a pilot program where someone could come up with 5% cash down payment, and the program would help them make a 5% sweat equity improvement to the home for the rest of the down payment.

The whole thing worked fine in theory, until we did the first one. The appraiser was supposed to approve the proposed improvements equalling 5% and he basically said "appraisals aren't necessarily accurate within 5% I am not sure how to go about this". We agreed that since 5% at that time was around $1,000 he would create a labour-intensive to-do list that was approximately equivalent. I think in one case we added a bedroom closet, trimmed out baseboards in a living room, and laid down some peel and stick tiles. That appraiser was a reasonable dude...

A couple of years ago there was a stink about "real estate appraisals" and the fact that real estate companies had a stake in how much a property sold for (% of value). The news story I read stated that real estate sales people were putting the strong arm on the appraisals to get it higher than it truly should have been due to their "6% of sale price" commissions. My thought is that it doesn't take any more work to sell a house for $100,000 than it does for $200,000. Jacking up the appraisals and letting people buy houses with 0 down that they could ill afford (can you say "EGO?") is what is bringing about this house of cards. Never let a reals estate person appraise your property.

I don't know about averaging, Steve .... every time I mention that word my mentor threatens to kick my heinie

I know what you mean about rural stuff, which is the majority of what we do. A few weeks ago I had a gross adjustement of 160% on one of the comps ...... there was nothing else and you work with what you got.

Never say the word. Call it "the mean" and maybe he'll be confused.

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Society has gotten to the point where everybody has a right, but nobody has a responsibility.

I'll try that, but sadly it is pretty much impossible to pull the wool over his eyes

One more comment. An appraisal is an opinion. Unless an appraiser missed the boat big time, like ignoring some pertinant facts, it is not likely any state agency would get involved.