Appraisal Confusion Anyone?

So, anyone have even a little confusion over the significance and weight of appraisals these days? I would hope that you just raised your imaginary hand, but if you didn't, you might benefit from a little insight on these things.

Starting with our take on appraisals, it is always funny to me how real estate agents will post on our MLS communication board about how a home is "priced way below recent appraisal". See, this wouldn't be funny except it is a given that any home that is going to sell is going to HAVE to be priced below appraised value. I think that the general public, including most real estate agents, buy into several misnomers about appraisals. Here they are:

1.) Appraisals are used to determine what a home will sell for
2.) Appraisals are the most accurate tool for determining the value of a property

Neither of these falcities could be further from the truth! In fact, I had an excellent and lengthy conversation with a local appraiser this morning about this very thing! See, lenders higher an appraiser to value a property, but probably for a very different reason than what you might think. It is definitely not number 1 or number 2 listed above. In fact, lenders look at the appraisal as simply a tool at their disposal, used to determine if the loan they are considering is a good one or not. Additionally, when a lender wants to know how much they might be able to sell a house for, they hire a real estate agent to do what is called a BPO, or Broker Price Opinion. In fact, when they have a "distressed" property, or have recently taken a property back in foreclosure, lenders will commonly have between 5 and 7 BPO's performed to track the actual saleable value of a property.

So, you might want to realign your thinking as to the usage of an appraisal. If banks lean more heavily on BPO's than appraisals for a sales value of a property, then what should homeowners do? Well, on the client side of things, we actually provide a complimentary BPO to any homeowner wanting to find out what their home is worth today. Only, we call it a CMA, or Comparative Market Analysis. In fact, you can request one HERE. But instead of having to pay us for it like the banks do, we offer it to you for FREE! Or, if you would rather simply discuss your options, give us a call today. Until then.....