We are hired regularly from local real estate agents and home owners to complete appraisals during the short sale process. Sometimes a bank will absolutely not budge to accept an offer lower than what they deem to be acceptable (even though their price is way too high), so the Listing Agent or home owner will hire us to do a full appraisal. The goal for the agent and owner is to show the bank what true market value is so that the sale can hopefully proceed at a more realistic price based on the market rather than a number the bank has picked. For example, if a bank says they will accept $200,000 for a property, but all other sales are at $175,000, a solid appraisal could potentially give the bank a realistic view of the market and thus help the home owner avoid foreclosure.
Should you hire an appraiser during a short sale situation? Our advice is to first attempt to negotiate with your bank. Don’t spend money on an appraisal if you don’t have to. If the bank will absolutely not budge on their price though, and your sense is that market value is really lower than what they are saying, then it’s time to hire a local and experienced appraiser to provide you with a credible and detailed appraisal.
Here is an example of some graphs below in a Sacramento neighborhood based on research we did during a short sale for a 2-bedroom house. All offers on this property had come in 10-15% lower than the bank’s approved number, but the bank would still not accept a lower price on this property.
As you can see in the graphs, over the past few years and recently, the 2-bedroom units have tended to sell at the lowest end of the market. In this particular case, the final appraised value ended up being about 10% less than what the bank was willing to accept, which is very helpful and relevant information for the bank to consider. When dealing with a huge number of short sale and foreclosure inventory, a bank will not always be in touch with market trends, particularly when something like bedroom count might make a huge impact on the value of a property.
If you have questions, please email us or call 916.595.3735. We are glad to talk with you about your situation and provide assistance if it is relevant for your needs.
Lundquist Appraisal Company