Who Sets The Market Value of a Home?

The market is the strongest it has been in five years. Good homes priced right are selling in the first few weeks for list price and in some cases higher than list price.

This is the good news, the bad news is once we get them sold and past due diligence (time for buyer to do their inspections) we have the dreaded appraisal to deal with.

The appraisal time period is usually the same time period as the financial contingency. This was not a problem in the past. Most homes appraised. Today it is a roll of the dice. You may have a home priced at the market price and have the homes that sold to support that price and still deal with a home not appraising.

Value has always been established by what a seller will sell for and a buyer is willing to pay for a home. That is no longer true. Value is now established by what an appraiser determines the value to be.

Appraisers only look in the rear view mirror. They try, in good faith, to take a snapshot of the market and when your rear view mirror only shows homes that have sold, in one of the worst real estate markets our country has experienced, then you can see how they would not have any homes to justify the new price in the changing market.

The guidelines imposed on the appraisers are so restrictive and there does not appear any calculation for appraisers to make in the improved market.

For example, if there is a 4 percent increase in property values since January in Peachtree Corners and the market continues to thrive, but homes are being appraised based on sales that closed in the last year, then how can our market appreciate.

In this past week I have had four appraisals come in below what a ready, willing and able buyer was willing to pay for the home.

One of these homes, is highly desirable in a sought after neighborhood, but a neighborhood where the most recent home sale was in February. This was a home that came on the market at the end of our bad market so the value was not an indication of values today.

The appraiser did not use homes that are pending, because they have not closed and therefore the selling price is not available, and yet the pending are much stronger and reflect the changes. The appraiser is following the guidelines he/she has to follow yet today’s true value is not reflected. The home appraised for about $30,000 less than the sales price.

When I price a home for the market, I take into consideration the increased demand and the lower inventory. The market reflects if this a correct price for today. Homes that are selling for higher than list and have multiple offers confirm that value has been established.

This will slowly change, cash offers and people willing to pay higher than list will eventually impact our market. Until this time, appraisals will continue to be the biggest challenge we face.

As I just mentioned the commonly known rule is that the market value of a home is what a seller will sell for and what a ready, willing and able buyer will pay. Since the lender is putting up the majority of the money in most cases, the lender must depend of the appraiser for a gauge of market value.

New on the market is 4634 Fitzpatrick Way in North River Crossing and priced at $400,000

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