Years ago, when my husband and I were moving, we had one realtor say our house was worth this much, and another say it was worth ,000 more than that. Back then, ,000 was a big difference, and that taught me something. (Yes, we got ,000 more)
Today, my sis and I own a commercial building and the balloon is due. And the bank says it’s now worth ,000 less than we paid for it ten years ago, and that the refinance amount is ,000 less than what she and I still owe. So they expect us to come up with that ,000.
What bothers me is the appraisal and the "comps" they mentioned. Our building is far newer than any in town. Plus one appraiser is clearly going to be different than another.
What are your thoughts about appraisals? Our experience says they can be skewed.
There is a difference in an appraisal from a licensed appraiser and a comparative market analysis from a Realtor. It sounds like your first experience was a comparative market analysis. Realtors sometimes compare properties that are for sale, not properties that sold. That skews the comps. An appraiser compares property to properties that have sold, not properties that are for sale. Usually an appraiser allows an adjustment based on age, size, updates, etc. An appraisal should be more accurate in determining market value than a comparative market analysis. Even so, it can vary from one appraiser to another as they are all human. I have noticed that appraisers tend to turn in appraisals that somehow come out to exactly the selling price of a property. Occasionally you’ll get one that’s higher or lower but more times than not, the appraisal is exactly where you need it to be. That tells me the appraiser is not just comparing properties but also trying to get a sale to go through.
Does not matter if the system is flawed or not. What matters is you getting the balloon refinanced.
You started your post by saying, "we had one Realtor…."
Realtors are experienced in ballparking the value of a property for listing purposes, however, they are not licensed by the state to determine actual real value. That is the difference between a real estate agent and a licensed appraiser.
Appraised value also CHANGES throughout the years…people must understand this process before they get into balloon mortgages or ARM’s..there is no guarantee of the increase in value because the appraisal only gives you TODAY’S value in TODAY’S market…not 6 months ago, not next year…TODAY. You can’t use years-old appraisal to a property today and determine if the appraisal is valid or not.
Nowhere in the appraisal does it state that your home will increase in value or even stay where it is, other than the section that refers to what the market is doing TODAY.
Commercial property is an entirely different matter and appraisals are based on different things than residential property.
You are comparing apples to oranges.
They are getting an independent inspection, so it’s not them telling you what it is worth.