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706.571.0424 or 1.866.571.FMMC (3662) for a FREE Loan Analysis! |
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HOME'S MARKET VALUE
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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.
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