Posted by Jim IL on March 04, 2001 at 19:56:31:
I don’t tell potential buyers what the appraised value of the home is.
IF they ask, which they normally do not, I simply say, “Well, I’ve not had it appraised, but when I ran the comparible sales in the area for the last few months, we came up with the price we have on it. I know from being in the business that homes are valued at what people are willing to pay for them, so comparible recent sales in the area is a better guide as to value of a home.”
You may tell them also that they are getting an “option to purchase” which means several things.
- the price is locked in TODAY!
- any appreciation which causes the value to exceed the option price gives them equity when they buy.
- IF the home appraises for less, they do NOT have to buy, it is after all ONLY AN OPTION!
Frankly, if you are dealing with a potential buyer who wants more info other than “how much upfront? and how much per month?” , then you are probably dealing with the wrong buyer.
I also like to tell people that appraisals are not always accurate and this is why I personally do not rely on them.
Appraisals are largely based on the sale price, coupled with recent home sales, and the condition of the home.
One of my tenant/buyers cashed me out last year by getting there own loan.
The appraisal done by their lender came in at about $2k over the sale price.
I noticed last month that the home was for sale, and it sold a couple of weeks ago.
I looked up the sale and it went for $12k more than they paid.
The sale was conventional, so the appraisal must have come in for that amount at least.
(Unless the new buyer had CASH to compensate, which is unlikely IMHO.)