What happens when the seller finds out appraisal estimate?

Question

I need to get an appraisal on a seller's home before I can make an offer. If I was to get seller's persmission to have an appraiser give the estimates for the house, will the seller want to sell at the estimate value once they discover how much their house is worth? I figure it would be easier if I could get a value on the home before making an offer. Seller's don't have any idea how mcuh their home is worth, which is a good thing. This gives me an advantage if they home is worth less when it is really worth more than they think giving me room to make a spread. If I do this they will of course find out the true value, right? Even though they are motivated to sell for cheap, they may have second thoughts about taking low ball offers.  Will they?

Robert Hanson · Answer

I have a couple of thoughts...

First of all, you shouldn't look at taking advantage of a sellers ignorance as a good thing. I am always straight up with sellers and give them the comps that I find, I then explain that I need to buy their house for $XX in order to make a profit. I can tell by your questions that you aren't experienced and I think most would agree that starting out with a mindset of taking advantage of someone is not good.

Secondly, why on earth are you having an appraisal done? Learn to run your own comps. It will be very difficult to make any money if you order an appraisal for every house you look to make an offer on.

Jerry Puckett · Answer

You know, I visit with quite a few folks each month who are interested in selling their homes. The large majority of them will go on to list their properties. Since I've taken the time to establish some rapport with them, they very often listen to me when I tell them that "so and so is the best agent around here and will take good care of you"

Now since I can't legally get a referral fee for this service, the next best option is to barter services. Like pulling comps, etc. No one likes to do anything for free, but there's more than one way to pay. Just sayin'...........

J Scott · Answer

A couple things:

1. No, a seller never needs to know what the appraiser determined.  In fact, the seller doesn't need to know that the appraiser was ever there -- just tell him you are doing inspections and he'll assume the appraiser is an inspector.

2. I assume the appraisal will be to determine an ARV on the property, and not an as-is value.  Appraisers generally aren't investors, so an as-is value from an appraiser really isn't going to give you any information about how much you should be paying for the property.  You need an ARV to determine how much you should be paying.  So, if the appraiser is giving an ARV, it really doesn't matter if the seller knows what that ARV is, as he's clearly  not in any position to do the repairs to get the property into shape to sell for that amount.

Steve Babiak · Answer

K. Marie's answer is the best answer I've read so far in this thread.  What I would add to her statement that is in this quoted bit, is that the appraiser isn't allowed to disclose the appraisal to anybody but the party that ordered the appraisal.  To disclose to anybody else, the appraiser must be given permission, and that permission usually must be in writing from the party that ordered that appraisal.

EDIT: just wanted to add that none of the answers above were necessarily wrong ...

Don Konipol · Answer

Before comps were generally available to the public, the main value of an appraisal was the appraisor's access to comparable sales and his training as to appraisal technique.  Now that comps are available almost everywhere, the appraisors main value is his knowledge of appraisal technique.  However, residential appraisal techniques are much easier to learn than commercial appraisal.  And residential appraisal is made very easy if the house is part of a large subdivision development with an active resale market.

The appraisor's opinion of value is just that, an opinion not an absolute.  The reality is that appraisors valuations can be significantly off from what you can purchase or sell the property for.  If your using an appraisal as a guide, you are using it correctly.  If your using the appraisal as an absolute, you will be in for many suprises.

Account Closed · Answer

Antonio Bodley  My farm county has a private data provider that I subscribe to. It makes all the difference.  It's much harder for me to work in other counties as I have found no equivalent to this kind of data elsewhere.  The national RE data companies are less complete and have less search features.

Account Closed · Answer

Antonio:  I don't know how much agents charge for BPOs.  I'm lucky in that my local RE data service has up to date comps and includes all sales. I do my own comps.  I have been disappointed in several agents and their ability to do comps.

Account Closed · Answer

If you order an appraisal or inspection and you pay for it, you own it.  The seller isn't privy to it unless you were in contract with an appraisal clause (where you don't have to buy unless it comes in at a certain value).  In which case they might ask to to see it to verify the value is under purchase price.

I've never ordered an appraisal before purchasing any property, and I would never spend money on a property I didn't have in contract.  You should be able to make an offer without an appraisal.  If you need help with values, you could work with an agent to get comps or a BPO.

Antonio Bodley · Answer

Jerry Puckett I personally would prefer not to get an agent involved, but so many others agree with each others that agents are the best source for finding out home values. I find it hard to trust anyone to provide me with help getting an accurate home value when their main source of income is dependent on making a sale.

K. Marie Poe How did you discover this private data provider?

Antonio Bodley · Answer

K. Marie Poe Are you using MLS or something esle as your data service?

What happens when the seller finds out appraisal estimate?

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