Your question- Why are appraisers looking at listings-When they are talking about listings – this means you can buy the same model or unit in the same area or building for a price that is equal to the appraised value of the subject property– this needs more detail
In an open market a house will only sell for as high as its demand price
this is true for an appraisal too
example
Condo for sale – 3 bed 2 bath built in 2004 and is 2000 sqft on the 7th floor is listed for 300K
the subject is the same model on the 3rd floor it will appraise at 300k or likely less- because of the lower floor
(Question does the buyer know about the condo on the 7th floor- probably not)
Does this transaction have well informed buyers and sellers? if it is a condo it does not……..this is why we are having problems in our Fl condo market with appraisals – Realtors are not showing buyers all the units for sale in the building but appraisers see all of them
From a buyers/consumers point of view why would I pay more for a home that is exactly the same as a listing with a lower price – you wouldn’t
Listing are driving the market price……. 2 years ago properties were increasing in value- people were overpaying and there were bidding wars for homes …… the appraisals were going up beyond the list price so the sold comps were driving the market……… life was good
now you have 10 sales/comps all the same house no differences -same area
sales/comps
310K sold in June
308K sold in June
306K sold in July
306K sold in July
305K sold in July
305K sold in Aug
305K sold in Sept
302K sold in Sept
301K sold in Aug
300K sold in Sept
15 listings same model between 310 to 295 and they are going to sell below the list price in a buyers market, but the 295 will sell first
this is the type of DATA appraiser are looking at
2 years ago you would appraise the house 307K to 310K prices were stable or going up
Now if you can buy the same home for 295 why would you not
An appraiser brings this appraisal in at 303K because of the last couple months sales/comps HMC asks why is the not worth 310K appraisers are looking at listings and next month it could be apprised at 300K……. remember the 295 Listing
This is the start of a declining market 310K to 300K is only a 3 % adjustment over 3 months (not a big deal just an adjustment period) but IF this is continuing to happen for each quarter and you will have a declining market
Appraiser has to consider what a buyer would pay for this home in an open market with well informed buyers and sellers thus listings must be looked at in today’s market
this was long but there is no easy way to explain this
Jeff Huffman
Area Appraisal Manager
