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In the real world, very few
individuals order appraisal reports to establish an offering
price or to substantiate a purchase price. At the point that an
offer to purchase (in a typical residential transaction) is made,
the price has been set by other parties, not the purchaser. The
price has been determined by the seller, who wishes to obtain the
highest price possible, or the agent, who receives a percentage
of the price as compensation and often represents the seller in
the transaction.
The real estate agent will
typically perform a comparative market analysis (CMA). The
appraisal laws in most states allow real estate agents to perform
CMAs without an appraiser's license or certification. A CMA
is a necessary part of the agent's preparation for a listing
and consists of examining sales of properties in the area to
arrive at a listing price. The reliability of the CMA depends
upon the agent's experience and the characteristics of the
property. The agent will suggest a selling price to the seller
based upon the analysis. However, neither the seller nor the
agent are bound by the results of the analysis, and the agent is
not required to follow any formal procedure in completing the
CMA. If a seller wishes to list the property at a price higher
than the price suggested by the agent, then the agent may be
forced to accept the listing at that price or risk losing a
commission.
Purchasers believe that they are
getting a good deal if they make an offer lower than the listed
price. But how far above the market value was the property
listed? 10%, 15%, maybe even 20% above the fair market value? A
negotiated price of 10% less than the listed price on a property
that was listed at 20% above its value is not a bargain. The
agent cannot tell the purchaser that the offered price is higher
than the value, or even higher than their own CMA. In most
states, they must submit the offer to the seller.
The seller of a property may want
to order an appraisal before listing the property. Of course, the
cost of the appraisal is always a deterrent, especially if the
seller knows that a buyer will pay for it when applying for a
loan. But the appraisal is often justified. The seller could lose
a sale if the property appraised for less than the sale price
when appraised by the appraiser.
If you have questions just ask!
You may contact Virginia Mortgage Services for your home value
questions by email, phone or by appointment in our office.
Start now by filling out our secure
online loan application! Call
us at 804.379.3302, Monday through Friday from 9 a.m. to
5 p.m. Eastern time.
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