Florida Real Estate Appraisals

Florida real estate appraisals

The purchase price of a car has little to do with its sticker price. You can get jewelry appraised for thousands more than you paid for it. Should you really trust real estate appraisals? Do they have any relationship to what a property is actually worth?

The problems with Real Estate Appraisals

Who Does the Appraisal?

In Florida, you must take a substantial amount of classwork, pass a state test and then spend a couple of years working under another appraiser's license before you are a fully certified real estate appraiser. Generally they are well trained. But, as they say in the computer business "garbage in, garbage out". In other words, do appraisers collect the information they should? Is it in their best interest to do so? It depends on who is paying them.

Who Pays the Appraiser?

Real estate appraisers get a lot of work from the banks. With all the foreclosures this is not surprising. If you want steady work, you want to play "nicey-nicey" with the bank. What does the bank like to see? They certainly do not want appraisals that accurately reflect the true value of the home.

"Hold on", you say. "Why would a bank want an inflated appraisal if they will never sell the property for that amount?"

First of all, you have to understand that not all buyers will do the research that we will do. If a property comes back with an appraisal of $200,000, the uninformed investor or buyer might feel they received a genuine bargain at $180,000. But, we might find that the last sale for a similar home in the same neighborhood was $160,000 and that was 10 months ago. In addition, a little digging could find 30 other homes in a mile radius of this property that were in foreclosure or about to be foreclosed upon. The bank does not like to sell us the house for $140,000 - but they often do.

Unfortunately, there are a lot of amateurs who will look at the appraisal and think that it is gospel. I see newbie investors bidding for propertiesat auction that they could buy for less right out of the MLS.

The Real Value of a Property?

I do not want to turn this article into a book on appraising real estate. Instead, let me lay out a few simple rules for you.

You do not care what the appraisal says. Here is what you care about:

1. How many houses are for sale in the neighborhood?
2. How many similar homes in similar condition?
3. How long have they been for sale?
4. When was the last sale and how much was it for?
5. How long was it on the market?
6. How many homes are in trouble in the area (lis pendens, forclosure, etc)?

I could go on an on. Other questions will pop up depending on how the answers go.

Where Can I Get this Information?

We use a service that you can subscribe to as well. It is about $50 a month and well worth it. The first time you put in your address it will blow your mind. You could not anticipate how many homes in your neighborhood are in trouble.

Now What?

Now you know that an appraisal does not mean a thing. It has no direct relationship to the value of a property. We will help you value a property and make an offer. You will win some and lose some. But, there are so many out there, it doesn't matter.