Pre-Appraisal

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nomogy_IHB

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Hi All,



Recently I am searching for SFR in Irvine. What I found is that majority of listings are at WTF prices and seller

doesn't know the reality of current real estate market. They want to sell their home with price that they think (or maybe

it's the case that they owe huge amount to bank so they can't afford to lose by selling at lower price so they stick with

their asking price). If they are serious about selling their home they should list the home with fair market value ( should

not list the price that they owe to the bank). that is if they want to sell in present time. If they can hold on and wait

until they find the buyer for their asking price then they are dreaming unless it is fair market value listing.



Some sellers are not aware of their home value and list the price high and their house doesn't get sold.

I had encounter this with one home that seller is asking WTF price.



I am going to propose them that let's appraise the home and whatever the value comes out from it.

I will decide if I want to offer the home with value that was appraised for. For example if the value comes

let's say 700K and if don't want to put offer at 700K I will pay for the cost of appraisal. If I decide to purchase

with that price still I will take the cost of pre-appraisal. So seller has nothing to lose but if seller thinks

that they can't afford to sell with that price even it is based on today's market value then they will pay the

cost of pre-appraisal but atleast they know what their home is worth. This way they can avoid a situation

where we go in escrow and bank comes and appraise the value of their home at lower then asking price and

buyer walks out of the deal.



Let me know if anybody has done this before or if it is good to do it or not.

As always I appreciate your reply and knowledge that you share in this blog.



-Nomogy
 
Interesting idea.



I think you're going to see a lot of "We're #1 fingers" ... not talking about the index one either when you propose that idea to a seller.



LOL



Sorry, that's the most ludicrous thing I've heard yet. Put yourself in the Sellers mind.
 
I know it is crazy idea LOL. But I thought that as a seller If I want to sell the house in this market. I should have listing

price according to current market and then I would be able to sell it if I am lucky. But with WTF price I will not attract any buyers.

Now it is different story that how much I owe to bank. Because the prices have declined and if I bought at the pick I would not be able

to get that price in near future and there is no point in going in to escrow with buyer willing to pay WTF price and then walks out

when bank appraise lower unless some crazy dude wants to pay the differential amount between asking and appraisal value.



So this is only for sellers that want sell thier home in this condition.



-Nomogy
 
[quote author="nomogy" date=1233217805]Hi All,



Recently I am searching for SFR in Irvine. What I found is that majority of listings are at WTF prices and seller

doesn't know the reality of current real estate market. They want to sell their home with price that they think (or maybe

it's the case that they owe huge amount to bank so they can't afford to lose by selling at lower price so they stick with

their asking price). If they are serious about selling their home they should list the home with fair market value ( should

not list the price that they owe to the bank). that is if they want to sell in present time. If they can hold on and wait

until they find the buyer for their asking price then they are dreaming unless it is fair market value listing.



Some sellers are not aware of their home value and list the price high and their house doesn't get sold.

I had encounter this with one home that seller is asking WTF price.



I am going to propose them that let's appraise the home and whatever the value comes out from it.

I will decide if I want to offer the home with value that was appraised for. For example if the value comes

let's say 700K and if don't want to put offer at 700K I will pay for the cost of appraisal. If I decide to purchase

with that price still I will take the cost of pre-appraisal. So seller has nothing to lose but if seller thinks

that they can't afford to sell with that price even it is based on today's market value then they will pay the

cost of pre-appraisal but atleast they know what their home is worth. This way they can avoid a situation

where we go in escrow and bank comes and appraise the value of their home at lower then asking price and

buyer walks out of the deal.



Let me know if anybody has done this before or if it is good to do it or not.

As always I appreciate your reply and knowledge that you share in this blog.



-Nomogy</blockquote>
It won't work because the seller may think they you may have someone influenced the appraiser to get a lower value. If they have a half way decent listing agent, their agent should have shared comps with them. The problem may be either that the sellers and their agents are still high on Kool-Aid or they are trying to sell their home for the outstanding loan amount. Your best bet would be to be patient and picking up an REO from a motivated bank. I'm working with a few folks who are looking to buy and when we send offers out sometimes we send sale comps to show that our offer is fair.
 
First thing sellers and buyer has to agreed to do this and then

buyer and seller can pick independent appraiser randomly that they don't know so there will be less chance or no chance to influence

on appraiser to lower or higher the value.



-Nomogy
 
I'm not understanding how you think you can require the seller to pay for the appraisal if they choose not to sell at that price. Is this a contract? Who actually hires the appraiser? It seems to me that whomever contracts with the appraiser will be responsible for the fee. You aren't going to get the appraisal without payment and unless one party agrees to pay before the appraisal, I don't think the appraiser will want to do it. Any appraisers out there who would like to chime in on this one?
 
[quote author="nomogy" date=1233217805] Hi All,



Recently I am searching for SFR in Irvine. What I found is that <strong>majority</strong> of listings are at WTF prices and seller

doesn?t know the reality of <strong>current real estate market</strong>. </blockquote>


Majority by definition <strong>is</strong> the market. If it's only a minority then the rest of your post has the possibility of making sense.
 
What I was saying is that, I've this seller thier home listing price in my opinion is high 700k comparing the the house that has been sold in

same community in last three to six months ( there were four homes sold).

1.) 2200sqft price per sqft $305.00 escrow closing price $671000

2.) 2500sqft price per sqft $309.00 escrow closing price $772500

3.) 2800sqft price per sqft $298.00 escrow closing price $834400

4.) 2400sqft price per sqft $301.00 escrow closing price $722400

--------------------------------------------------------------------------------

AVG price per sqft is $304.00



Now the home that I am looking is 1850sqft with asking price 700k

According to above avg sqft price this home comes to 562k.

But I am being told that you can't compare the small homes with large homes

and location and condition matters.

Though all those homes listed above were in excellent condition and in good location as well.

This home that I am interested is corner lot so it is in better location with open space around.

So I thought that taking all these factors, I came up with an offer 640k which is $345.00 per sqft.

Which is around 14% higher then avg. price in same community.



Now seller thinks that they can get around 675-680k ( which I hope they do if it is fair market value )

But I told the agent that we don't know the real price of the home so we can't just offer them what they

are looking for and based on my calculation I think the price we offered is fair.



That's why I thought about something like pre-appraisal where buyer and seller both finds out about the price

of the property and then buyer and seller both know the real value of the home.



There is know contract that who pays the pre-appraisal of the home, It just both party have mutual agreement for

their best interest and if the home value comes to 680k and if I don't want to buy I am responsible for the appraisal cost

because I didn't by and they should not spend money to appraise for each buyer.

if value comes to 640k and seller doesn't want sell then they can take the cost of appraisal because if the seller doesn't want

to sell it so buyer is not responsible for their decision and finally if seller and buyer both agreed on the price that came out

from appraiser and go in to contract for buying or selling process then either can pay for it or split.



Now the question is, Who will trust the appraiser, As a buyer or seller both party thinks that other party may influence the appraiser.

So as I said before that both party should be honestly and agreed and choose an appraiser who is independent that we both don't know.

Also anybody buyer or seller can pay appraiser first and then whatever the outcome based on that they should take the responsibility

of the cost.



Anyways this is just my opinion, I could be dead wrong in this and it may sound crazy but that's my thought.

I Appreciate your reply and comments.



- Nomogy
 
Please give up. Your logic is soooo flawed it doesn't matter. If the seller doesn't care, why should you (other than the fact you want a $150k discount LOL)?
 
I 100% agree with you Optimusprime.

Why should I care if the seller doesn't care to sell their home. This is going to be buyers market for quite sometimes.

It just something I thought so I asked around.



- Nomogy
 
If you were talking about a home that was not on the market, then I would think your idea had more sense. If the property is on the market, the seller already thinks that he/she know what it is worth. And why would an appraiser know any better than the seller? If I was the seller, I would politely decline your appraiser offer.

But, if we are talking about a home not on the market, I would suggest three appraisals, with the average as the agreed upon price.
 
Awgee,



This home is on market already for sale. I agreed with you that seller (smart seller) would know how much their home is worth but like I said some sellers are still put the high

price then it is worth because they are in big whole to pay their loan or they just don't know the real price of their home.

Yes if seller knows their homes value and have done their home work and put the fair market value then yes they can decline my offer.

In my case based on the previously sold home I estimated that this home would be worth max 625k to 630k but seller put the price 700k so

either I am wrong or they are wrong but this idea was to serve both and find out what is actual price of the home and then go forward if seller

is willing to do that.



Thanks for reply.



-Nomogy
 
[quote author="nomogy" date=1233229062]Awgee,



This home is on market already for sale. I agreed with you that seller (smart seller) would know how much their home is worth but like I said some sellers are still put the high

price then it is worth because they are in big whole to pay their loan or they just don't know the real price of their home.

Yes if seller knows their homes value and have done their home work and put the fair market value then yes they can decline my offer.

In my case based on the previously sold home I estimated that this home would be worth max 625k to 630k but seller put the price 700k so

either I am wrong or they are wrong but this idea was to serve both and find out what is actual price of the home and then go forward if seller

is willing to do that.



Thanks for reply.



-Nomogy</blockquote>


Nomogy, there is no <strong>ACTUAL</strong> price of a home. There is only what a seller and a buyer agree upon. My point was that the seller knows how much they think it is worth. And I would guess that no one, including an appraiser, is going to change their mind. If the appraiser comes in with a price of $700,000, is it going to make you any more likely to pay more than you originally thought the property was worth? Why would the seller change their mind because of an appraiser?

The only thing that sometimes changes a seller's mind is time on the market without reasonable offers.



I find it a bit humorous when people talk about what a property is worth or what the fair value is. There is no such thing. There is only what a seller is willing to sell for and a buyer is willing to buy for. An appraiser does not determine worth or value. An appraiser only sets an amount for the bank to judge their risk.

Neither you nor the seller is wrong. My guess is that you will end up spending money for an appraisal, no matter who agrees to what.



Write your offer; at the amount you deem comfortable for you. Simple.
 
Awgee,



Your are correct. There is no actual price for home.

In my case, It is only when seller is willing to sell for the value that comes out from appraisal

and also if I am want to pay the price of the appraisal value. if both condition meets, Otherwise

They can look for other buyer and I can look for other property.

This just only to satisfy the buyer that I paid for appraised value not more and to seller that they sold if for

for the appraised value not less.



Thanks for your thoughts and input, I appreciate it.



- Nomogy
 
[quote author="awgee" date=1233232363][quote author="nomogy" date=1233229062]Awgee,



Nomogy, there is no <strong>ACTUAL</strong> price of a home. There is only what a seller and a buyer agree upon.



I find it a bit humorous when people talk about what a property is worth or what the fair value is. There is no such thing. There is only what a seller is willing to sell for and a buyer is willing to buy for.



Write your offer; at the amount you deem comfortable for you. Simple.</blockquote>


The fair value and actual price are what the seller and buyer agree on. So there are fair values and actual prices.
 
I won't comment on the pre-appraisal since enough opinions have been given, but would just like to add that you take into consideration what type of seller you would be working with here throughout escrow. Do you want to work with a stubborn or unrealistic person who has their head in the clouds, or would you like to work with a seller who is motivated and seems like a fair-minded person? In escrow, issues often arise that require cooperation. The scenario you are providing here where the seller has chosen a WTF price shows this is the sort of person who is not very eager to take existing comps into consideration and to unload this home quickly at a realistic price. This could reflect poorly on their other reasoning abilities. Just as important as <em>what</em> you are negotiating is <em>who</em> you are negotiating with. Consider who you would like to do business with. Just my .02. Good luck.
 
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