How much is your property worth?

The smart-ass answer is, it's worth exactly what someone's willing to pay for it.

The long answer is, it's worth what you want to pay for it, or it's worth what the seller thinks it's worth, or it's worth what the bank thinks it's worth.

Yeah, about that.

So, say you decide to make an offer on a property. You've looked at all the comparable properties that have sold recently, you figure out how much you think it's worth, you make an offer. You make an offer, the seller agrees, you think you're set.

Not so fast.

Then the bank gets involved.

It sends out an appraiser to make sure the property is worth what you and the seller thinks it's worth.

During the housing boom, often the bank thought a property was worth less than what the buyer and the seller thought (turns out, they were right, ha-ha!).

So, buyers had to either kick in the difference between the bank's appraisal and the offer price, walk away, or try to get the seller to lower his/her price.

Or, try to convince the bank's appraiser to up the appraisal.

Which, of course, led to lots of conflict of interest (hey, appraiser, if you want more of my business, you'd better make this property appraise out ...).

Anyway, that's all in the past.

Nowadays, surprisingly, it's become easier and easier to get a property to "appraise-out".

According to Kenneth R Harney, in the Washington Post:

In some parts of the country, mortgage lenders &8212; and appraisers themselves &8212; say they're increasingly coming in with valuations higher than the contract prices agreed to by sellers and buyers.

"I think buyers are pushing very, very hard," Yamato said &8212; and they're walking away with steals.

I encountered a very similar situation, last week. A client of mine was looking at a condo listed at $390,000 (hi Alan!). Due to my client's persistence (and my crack negotiating skill) we were able to get the seller to accept his offer of $360,000.

So, then the lender sent out the appraiser.

And he ended up appraising it at $370,000.

Instant equity, eh?

Of course, I guess you could still make the argument that the appraisers are "fluffing" the numbers, but that's not true, probably. I mean, what buyer would be willing to "overpay" for a property, these days?

(Also, makes you wonder, what if he had been willing to pay full-price of $390,000? Would the appraisal have magically become $390,000 or $400,000? We'll never know.)

Source: High Appraisals Signal Change - By Kenneth R Harney, The Washington Post