The Appraised Value of Your Mission Veijo Home is Quite Important
The appraised value of a Mission Viejo home in escrow
One of the highlights of any Mission Viejo real estate transaction is getting the appraised value of the home. It was hard enough for the buyer and the seller to go through countless rounds of counter offers to finally reach agreement on the purchase price. That’s what the price the seller listed the house for and the price the buyer agrees to cough up becomes when a deal is struck – the purchase price. The buyer’s lender is informed of the purchase price agreed to by their client, the buyer. The lender then requires an appraiser to come on to the scene to determine the appraised value to give the lender a warm and fuzzy feeling that the home is actually worth what the buyer agreed to pay for it. It’s a pretty reasonable step for the buyers’ lender demand, since they are actually forking over the funds to the seller. They want to make sure they are making a prudent investment and rely on the appraised value of the home to put them at ease.
So the appraiser visits the house in escrow, makes a proportional diagram, takes a bunch of photos, makes notes about the features; like granite, hard wood, linoleum, aluminum windows and other features, and provides a detailed report in an industry standard format of rows and columns. They take a look at the recent closed sales – only on-line or on paper. They can’t visit the three most recent similar closed sales (known as comps) – there are people living there now! They don’t have time to tour the other available options still on the market, so they do not see the houses the buyer passed over in favor of the house they agreed to purchase. The appraiser doesn’t get to see why the buyer turned those down.
The appraiser’s opinion of value usually corroborates the purchase price. But sometimes they come up with a value that is different than the purchase price. When the appraiser comes up with a value that is higher than the purchase price, the seller might have second thoughts that they settled on too low a price. The buyer feels like they made an even greater deal, and the lender is happy to make the loan.
When the appraised value is lower than the purchase price, the lender is not able to loan the buyer the same amount of money. The lender can only make a loan based on the appraiser’s opinion of the value of the house. This is why the buyer, the seller, and both of their Realtors gasp when the appraised value comes in below the purchase price. And once everyone catches their breath, there’s some work that can be done to help the appraiser realize their mistake. Here are the top three things that have influenced appraisers to raise their opinion of the house’s value to match or exceed the purchase price:
- The comparable sale that was $100,000 lower was next to a noisy street.
- The comparable sale that was $100,000 lower was on a larger lot, but the lot had an unusual number of native oak trees which are part of a protected group and cannot be removed from the property, eliminating the option for a grassy lawn or a pool.
- The comparable sale that was $100,000 lower had no view of the mountains, golf course, or lake.
Highlighting these attributes of the low ball comp enabled the appraiser to recast the appraised value of the house in escrow to exceed the purchase price.
I’m Leslie Eskildsen. Just keeping it real in Mission Viejo real estate.
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