When Appraised Value Does Not Equal Market Value
We have a buyer who was convinced she was “overpaying” for her property b/c her appraisal came in low.
But, there were multiple offers for her property that were very close in price to hers, and there are nearby pending sales that are also similar in price.
The entire issue has to do with appraisal guidelines once again.
We repeat this often in this blog b/c the issue comes up so often: appraised value often does not equal market value.
If there are multiple buyers willing to pay $850,000 for a property in an open market, then that property’s market value is $850,000.
But – appraisers cannot appraise properties (in most cases) above the highest closed comparable sale in the neighborhood.
So, if there are no closed sales above $800,000, that property will usually not appraise for over $800,000.
But again, that does not mean the above property is not “worth” $850,000.
Once this was explained to our buyer, she was no longer concerned about her low appraisal.
This is something every buyer needs to understand in a fast-appreciating market where contract prices are tough to support in an appraisal.
Quick Tips for Realtors Buying Properties
Most seasoned Realtors know this, but when Realtors buy properties they can convert their commission to a closing cost credit. This turns taxable income into a non-taxable credit (and it is a wash for sellers).
The only caveat is that the credit cannot exceed actual closing costs, or it just goes to waste.
Realtors can also use their commission towards their down payment, but then it remains taxable income.
Jay Voorhees at (925) 855-4491
Real Estate Broker, CA Bureau of Real Estate, BRE# 01524255, NMLS# 335646