Evaluating The Techniques of Pricing Your Home -1 of 3 articles
out, and it will, you may be forced in to selling your home. No real estate agent, regardless of their qualifications, is going to sell your home for the inflated appraised amount. The appraiser will in turn explain to you that the appraisal performed was not for market value but rather for a loan application. Also expect to hear all the disclaimers, including the changing market.
The bottom line is that you will be the only one holding the payment book. This situation doesn’t end with foreclosure, either. You see, both lenders still expect to be paid. When you house sells for less at auction, they will be looking to you for the difference. Neither the appraiser, nor the secondary lender is going to offer to bail you out of this mess.
This is not a fictional scenario. I actually interviewed a couple that had purchased a home one-year prior to our interview for $48,000. Admittedly, they got a very good deal on a foreclosed property, it was worth slightly more than what they paid. A few months after purchasing the home they requested and received an appraisal stating the value was $138,000 and took out a second mortgage making their total liens approximately $100,000. After receiving some sort of settlement they paid the amount down to $80,000. They considered selling, but their actual market value was around $64,000. With closing costs they would have had to come up with $20,000 just to walk away from the sale with no profit. I questioned their overstated appraisal, but they refused to believe that it was inflated. Needless to say, they are still living in that house.
While this situation does not occur often, incidents are on the rise. What is so amazing is that the clients rarely see fault in the appraisers outrageous opinion of value. Consumers tend to be blind to the truth when they are hearing the information they want to hear. It is a problem that you need to be made aware.
With that said, you can hire an appraiser to give you a market value. I don’t think it is a necessary expense. Most lenders will require a new appraisal from an appraiser of their choice and will not allow yours in their loan application package. Why spare the extra expense. There are other ways of ascertaining the value of your home, so put this on hold and explore all other
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