The price and value of a home can be determined differently: The amount paid for it or the appraised worth of the house.<\/p>\n
The terms are not usually interchangeable as the appraised value of a home tells you how much it\u2019s worth mostly for the lender to determine what loan terms may be possible. And sales price tells you how much a buyer in your market is willing to pay for it, which is largely determined by supply vs demand economics.<\/p>\n
Keep in mind a licensed home appraiser will consider a variety of aspects such as the home\u2019s characteristics, condition, improvements, location and market trends when setting a \u201cvalue\u201d whereas that doesn\u2019t necessarily determine what the market or a buyer will pay for it \u2013 or the \u201cprice.\u201d<\/p>\n
Sales Price<\/strong><\/p>\n Pricing a house may be a tricky balancing act, as you must strike a balance between comparable homes and sellers\u2019 expectations of what their home is worth.<\/p>\n Many homeowners wish to sell their property for a higher price than the market will handle. And at times real estate agents, may be tempted to list the property at a lower value in the hopes of generating a buyer frenzy or a rapid sale.<\/p>\n Again a seller can establish an asking price, but that price may or may not correspond to what buyers are ready to pay. For instance, one person may examine a home and determine that it is precisely what they want and well worth the asking price, while another may view the identical home and determine that the asking price is exorbitant.<\/p>\n As a result, the \u201ctrue\u201d value is determined by what the market will pay for the house at any given time.<\/p>\n Appraised Value<\/strong><\/p>\n A professional real estate appraiser determines an appraised value when a contract is created on a property. The appraiser determines the value on behalf of the lender by considering a variety of variables, including the neighborhood, the value of comparable properties of similar size and design, and even the type of fixtures on the premises and the arrangement of the floor plan.<\/p>\n Setting a home\u2019s appraised worth might be difficult. Even when properties are only a few blocks apart, their values might be drastically different. One might be a custom design and another may have a larger lot size, for instance. All of this, and more, are taken into account by a trained appraiser with the intention to create a value the bank will use to set the loan terms. Again this may be value to the buyer or seller depending on their offer, but is mostly for the purposes of the home loan if the purchase is being financed.<\/p>\n Why knowing the difference matters<\/strong><\/p>\n It\u2019s not necessarily wrong to pay more for a house than its appraised value if you do so with your eyes wide open. As for how this applies to prospective homeowners today \u2013 see home purchasing strategies.<\/p>\n There are a few things you may do if you anticipate a discrepancy between the appraised value of a home and the sales price.<\/p>\n Understand the importance of staying well under loan limits in case the appraised value doesn\u2019t come in high enough. Meaning a buyer should allow some leeway if the home appraises for less than the sale price by putting down a larger down payment. And depending on the loan-to-value ratio, you may be able to request a loan increase from your lender to cover the \u201coverage.\u201d<\/p>\n As a last resort, if you have not waived the appraisal contingency, your remaining option is to persuade the seller to accept a lower offer or request seller credits in order to cover closing costs.<\/p>\n Don\u2019t forget to consult your real estate and home financing experts to assist you throughout this process.<\/p>\n Please do not hesitate to contact me for how to compete in this competitive real estate market. About Kyle<\/strong><\/p>\n With nearly a decade of experience in the mortgage and real estate industries, I have a strong understanding of how to evaluate an individual\u2019s situation and determine how to best meet their goals. My approach for California, Nevada, and Colorado current or future homeowners is to educate, advise and deliver a top-notch customer experience. The price and value of a home can be determined differently: The amount paid for it or the appraised worth of the house. The terms are not usually interchangeable as the appraised value of a home tells you how much it\u2019s worth mostly for the lender to determine what loan terms may be possible. And […]<\/p>\n","protected":false},"author":2,"featured_media":1558,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[4],"tags":[13,15,16,17,14],"yoast_head":"\n
\nEmail me at kyle.mccray@elementmortgage.com or give me a call at 916.880.8059!<\/p>\n
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\nI\u2019m committed to working for my clients as their mortgage expert, advocate, and partner in their journey toward purchasing or refinancing a home.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"