Posted by Bill K. (AZ) on February 16, 2000 at 21:20:30:
Sorry, I can’t provide support for the concept you describe. I’ve never heard of this either. I’m an investor in Phoenix, not an appraiser. But, I’ve ordered many appraisals, and not once has an appraiser asked me about the “terms” I got on the property. Assuming that I’m following the lender’s rules regarding any seller carryback and down payment, the lender just wants to feel comfortable about the amount of money they’re loaning me on this property.
Appraisers and lenders don’t care about your “terms”. While a home with “terms” might be more valuable to YOU, those “terms” do nothing to affect the value in the lender’s eyes. If you don’t pay, they just want to know that they can get their money back from a foreclosure. If you get “terms” on a $100,000 home, and you think this increases the value to $110,000 in your eyes, will it sell for $110,000 if the lender has to take it back? Not likely. You see, the person who buys it from the bank won’t care what “terms” you got when you bought it. It’s really only worth $100,000 to him.
As I said, I’m not an appraiser, but the basic way appraisers calculate value is with comparables or “comps”. The appraiser will look for properties, similar to the subject property in age, size, location, amenities, etc, that sold within the past 6 months. Appraisers like to find 5 properties. They throw away the highest and lowest value and take the average of the remaining three. Then, they add value for amenities that aren’t found in the comps, and subtract value for things that detract from the property. For example, if your home has a pool, and the comps don’t, the appraiser might add $5,000. If you’re home backs up to a busy street, and the comps don’t, the appraiser might subtract 10%.
I hope this helps.
Bill K. (AZ)