Will Your Listing Appraise?

August 21, 2007 by Redfin Blogger

Reading Time: 2 minutes

Attention all Agents and Sellers!

Today, a tragic thing happened when I was appraising a townhome for a purchase; And I have to let my readers in on this because this story is one of those, “…don’t let this happen to you situations.”

I was assigned to appraise a 2000 sq/ft. 3 bedrooms, 2.5 bath townhome in Newhall, in the city of Santa Clarita. The subject property was built in 1978 and about a year ago, these townhomes were going for about $470,000. Today, I am seeing comparables at $420,000 and $435,000. The seller purchased the subject in March 2007 for $404,000. Per the listing agent, it was a fixer. I was told that the current owner put about $25,000 in up-grades and listed it on the MLS this June for $474,900. A buyer has come along and offered $470,000. This is great news for the speculator. She will make her dreams of flipping this house a reality and walk away with a nice profit.

YIKES! Put on the breaks! The bank has to fund the loan yet. At this point, I am asked to step in and supply to the bank an appraisal report, to verify if the value is there. I am sad to report that comparables in the area do not support the value. I am then provided a Fee Appraisal report ( an appraisal done independently of the bank). I notice that in order to achieve the value of $470,000, the Fee Appraiser used comps in an adjacent townhouse tract that was built in the year 2001and made only a $10,000 adjustment for age and condition. By definition, a comparable is a property that shares similar characteristics to the subject. A townhouse built in 2001 is not a comp for a property built in 1978. My value for the subject is $435,000. So now the seller and buyer will have to work out how they plan to carry out this deal. The buyer may end up walking from the purchase.

I hate having to cut a purchase, especially in these times. But my honesty and reputation is more important then trying to push a home value, just to make a sale happen.

So if you have dreams of selling big, make sure there is supportive data, true comparables, that will justify a possible selling price of your home.

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