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Appraised value

Appraised value is the value placed on an item, usually real property, by an appraiser who is known for his or her experience in a particular field.

In some instances when the mortgage market is booming, homebuyers are willing to purchase the property more that its appraised value. This happens in a situation with multiple buyers on the same property. It is similar to bidding for a house. Each offers the higher price until the highest bidder gets the house. Oftentimes the end result is that the price offers exceed the listing price. So in essence, a home’s market value in however much the buyer likes to perceive it.

There are reasons that appraisers do not always keep up with the market value. It is good to remember that appraisals are done for lenders, not buyers. The purpose of an appraisal is to justify the purchase price so that the lender feels like they are making a good investment since the property itself is collateral for the mortgage loan. Appraisals are made based on historical data such as sales that have closed in the past four months.

On average in the past four months, the average sales price in the United States for a resale home has increased by about $20,000. Of course, this amount fluctuates. In some areas, it goes up more and less in other areas. This increase is just for the “average” house.

Most appraisers will try to make allowances, but they still have to follow rules and guidelines. There are times when they cannot make any allowance especially when dealing with multiple bidding situations and in areas where there have fewer recent sales.

When a buyer’s bid is higher than the appraised value, sellers need to prepare by counter-offering that appraised value will not disqualify buyers, who make minimal down payments, for a mortgage loan. A low appraisal will affect buyers’ ability to qualify for the loan, unless they have other fund to make up the difference.

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