Home's Market Value
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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Appraisal Basics
Appraisal Methods
When To Order An Appraisal
Appraisal Needed To Obtain Loan
Helping The Appraiser |
