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Chat Plus: How Much is That House Worth?

Friday's Real Estate Live Web chat left Post real estate editor Maryann Haggerty and me with an overload of good questions and comments that we simply could not get to within the hour. Here's one of the best. And if you have some advice for this reader, don't keep it to yourself! Share it in the comments section.

Fairfax, Va.: I've had two contracts fall through because the house appraised for lower than the sale price and the sellers would not sell at the lower price. Do you recommend, in this market in which no one really knows the value of anything, doing an appraisal on a property before submitting an offer? Yes, I know it's expensive, but I'd rather spend 500 bucks on a property I am seriously considering than waste three months of my time only to see another contract fall through. How else are we supposed to valuate a property in this climate? The realtors, comps, Zillow, the county, they have all failed me.

ER: I think a pre-purchase appraisal would be a wise expenditure of a few hundred dollars. Just don't expect the lender to agree to use it for the mortgage. They always insist on naming the appraiser and on having the appraisal report sent directly to them. (Of course they also insist that you pay the appraiser's fee.) Property tax assessments don't accurately affect today's market value. (Although this question came from a Virginian, readers in Maryland should keep in mind that homes there are re-assessed only once every three years. Those assessments can lag the market significantly.) Zillow's values, while fascinating to play with, are still not accurate enough to be relied upon when you're handling real money. And a lot of real estate agents seem to be struggling at figuring out market value in this weird market. And, you're right about the need to cut the deal off quickly if the seller is going to be so delusional as to argue with a formal appraisal.

MH: Appraisers are struggling, too. (I'm seeing a lot of inviations to seminars and continuing education classes on the topic.) Lenders are tightening the time window for acceptable comps (ie, where a several-months-old sale used to be acceptable, it no longer is.) In some neighborhoods, it's increasingly difficult to know how much weight to give to forclosures and short sales. Traditionally, those are not considered arms-length, but obviously they affect the market. On top of that, there are other neighborhoods with few or no sales at all. How far do you extend the geographic window?

The bottom line is that even if you present an appraisal along with your bid, there's no guarantee that the next appraisal -- the one for the bank -- will be precisely the same. How does that affect your ability to renegotiate an asking price? I don't know. What do others think?

By Elizabeth Razzi  |  April 6, 2009; 6:00 AM ET
Categories:  Buying  | Tags: appraisal, buying, contracts, offers, price, property value, sales price, submitting an offer  
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