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Real Estate Buyers Walk Away Because Of Gap Between Sale Price And Appraised ValueThe obvious problem with the methods of appraised values of homes and/or the comparative market analysis (CMA) used by Agents & Realtors to try to speculate on a value of a home is causing many home buyers to walk away and home sellers to suffer even more loss. Reported in the Wall Street Journal, “asking prices are often out of whack with values that are later determined by appraisals.”1 The real problem is that Appraisers, Agents and/or Realtors do not deal in the reality of what each property is worth and at best can only speculate.
Attempting to measure and speculate on a value of a home or property nearby that is similar that sold in the past six months in the same or similar neighborhood to try to determine a price is not fair to the sellers or the buyers. Even if an Appraiser, Agent and/or Realtor try to use older sales going back several years they still are not able to find relevant numbers. All markets are always in fluctuation and each and every home or any property, developed or undeveloped land is unique and has its own features and benefits and liabilities and should speak for itself and not by what another has sold for in the past, present or future – no matter how what similarities exist.
The method of guessing by Appraisers and Realtors and/or Agents are not just limited to residential , commercial or undeveloped land but when it involves luxury properties it becomes even worse. Matters used to speculate like, services and amenities in neighborhoods, school district funding, police and fire services make any quantifiable data with relevant numbers for guessing a value next to impossible. So what is the practical result of the guessing system used by Appraisers, Realtors and Agents? The process leads more often than not to an appraisal amount that is much higher than the private treaty sale (negotiated sale) agreed upon price between the seller and the buyer.
A study was conducted that “confirms what many of us have thought but heretofore have only known anecdotally: That appraisals are not very accurate.”1and “that “a wide discrepancy between the appraisal values and the eventual sales prices of the properties.”2 Statistics from the study revealed that 64% of real estate was appraised at a value that was higher than the sale price and only 35% appraised less than the actual sale price.3 This study also revealed that “at the extremes, in 121 instances, the appraised value was more than double the sale price, and in 132 examples, the appraisal was less than 70 percent of the sale price.”4 So what if the appraisals are only a speculation at best about a value of real estate? Appraisals are what banks have been conditioned to think is an “accurate” way to find a value to real estate. An attorney at a law firm said, “Appraisals are important in nearly every aspect of a real estate deal, whether it is originating a loan, working out a loan, the decision to buy or sell a property and even bankruptcy.”5
What practically happens as a result of appraisals? The result has an effect upon everyone involved with the process of selling the real estate. The appraisal affects the result of what lenders offer to loan. A low appraisal results in a smaller amount for a mortgage on a property and a higher rate. What if the appraisal results in a value less than the “list” list price? When this happens someone is left with making up the difference. Either the buyer has to make a larger deposit for the mortgage or the buyer refuses to pay more than the appraised amount. This huge gap between the appraised price and what the seller wants and what the buyer is willing to pay has made many private treaty (negotiated sales) go South fast.
According to the National Association of Realtors (NAR) survey of over 3000 Agents, on average, one-third of real-estate agents said the appraisal process resulted in buyers and sellers delaying or canceling contracts or renegotiating to a lower sales price last year.6 According to the Wall Street Journal, going forward, experts say that one third of contracts being cancelled will increase.7 What if the loan amount is more than the value of the home by 80%? The buyer will have to put more money down.Real Estate Buyers Walk Away Because Of Gap Between Sale Price And Appraised Value2
So what is the alternative to appraisals and their method of real estate valuation and sales (private treaty – negotiated sales)? The problem is that both can at best ever only speculate on a value and price for a home or property. Is there a method of selling that only deals in the reality of what property is worth? How can anyone actually know what is the true market value of a home or property? The answer is the auction method of selling. The auction method is the only method of selling where true and fair market value is found that is based in reality, without any speculation. Fact is that every home and property is different and the guessing method of finding a similar home or property that sold is to use to try to measure the other is a disservice to all parties involved.
So practically what is the best way for Real Estate Sellers, Buyers and Banks to come to terms in what that is fairly? An auction provides the very best way for all parties to be treated fair. The seller finds out what is fair when buyers compete to buy the home and the price is discovered at auction where all the serious buyers come together and bid. The buyer prior to the auction can go and find out what they pre-qualify for with a loan for the real estate so they know their limit when it comes to biding at the auction. The banks can offer lower rates because they know that the real estate sold for the reality of what it is really worth.
Auctions also eliminate all the contingencies that are part of the traditional sales methods with Agents & Realtors because when the hammer falls the property is actually sold. It is not contingent upon appraisal, fixing this, repairing that, upgrading or the next thing. The real estate actually is sold.
Will you continue to not face the reality of what real estate is worth? Will you depend upon antiquated methods that are nothing more than only a speculation at best? If you have a property and want to sell it for what it is really worth and not settle for one cent less than contact us to schedule an auction. If you are a buyer and want to not pay more than what a home is really worth, then find an auction to buy your home or property. If you are a loan officer you will only have to find what a person is eligible to borrow instead of taking the risk and the speculation of an appraisal. Contact Us today at True Blue Auctions and let us Make Certain Your Hope By Faith Through Grace

Auctions Provide A Fair Opportunity For Both Sellers And Buyers
Ever wonder what’s the most unbiased way for buyers and sellers to interact where both can engage each other without completely exposing their bottom line?
Is it with the list, wait, and continuously reduce method of traditional selling by agent/realtor? How does the seller know they really received the most a person is willing to pay with this method of selling?
Fact is they don’t, because with selling by private treaty with an agent/realtor there are always contingencies and it is never time definite. What does that mean? Contingencies – The private treaty method of selling puts the buyer in control of the sale where they are able to dictate to the seller what they want fixed, replaced or anything they are able to negotiate in the sale to get what they want. Time Indefinite – The sellers never know when their real estate will be sold. Sure an agent and/or realtor may have a contract and they are usually six months long or up to a year and sometimes even longer. Can the seller of a home afford to be at the mercy of a prospective buyer who can dictate when they will buy the home, what contingencies they demand and the price they are willing to pay?
Can sellers really afford to wait today to have a home sold? What about the price? What is too much to ask? What happens if it is not enough? How can they tell either way? Fact is they really can’t.
The auction method is the only method of selling where an equitable opportunity for both sellers and buyers to come together and discover what the market is willing to bear upon the real estate being sold.
With the auction method of selling, buyers are able to set a reserve price and/or a minimum they wish to receive for their real estate. At many auctions I often have bidders ask, “What is the reserve price for the real estate?” I politely ask them, “What is the most you are willing to pay?” Most then realize that it would not be fair for me to tell them what the seller is willing to take or for me to start the bidding at their highest bid. At the auction we provide the equitable opportunity for the sellers and buyers to engage each other when we call for bids. Sometimes the price is more than what the seller has expressed they wanted and sometimes it is less! The bottom line is that it is the reality of what the real estate is worth. This is called “true market value.”
With the auction method the sellers don’t forfeit the most their real estate could possibly be sold because they have not put a price on it by making the initial offer to the public. With the auction method the buyers don’t forfeit more than what the market will bear by making a counter offer that may be too high. The auction method is time definite and both buyers and sellers can plan to move forward with their respective lives by knowing when their real estate will be sold and/or purchased. Do you want to receive the most money possible for your real estate? Do you want to pay the least amount possible for real estate? You know now where both come together in the most fair and free market method of engaging each other – at auction.  Contact us today and let us help you receive top dollar for your home.