patrick.net

They pretty much always do here in Florida.

My friend recently closed on his house.
He reached the point now like I did back in '10, that he's just got tired of waiting for the market to agree with reality. At the time he put an offer down on his house, the Zillow comps were all saying the house he was buying was well worth what he offered on the house. So then during the closing process with about a week to go. The reality finally hit and all of those houses that were in line with what he offered, disappeared. Now Zillow as saying that the average house in his neighborhood was worth 20K or more less.
He called me up sweating that the deal would not go through, that the appraisal would not meet his offer. It had been over two weeks since the appraisal and they still hadn't came back yet.
I told him to chill that if the house came in cheaper than resend your offer to only the value of the appraisal and not a penny more.

But I also told him which I turned to be right, that a house is worth what ever someone is willing to pay. I would bet that those earlier comps were offers on houses at the time. But then those offers fell though, so the comps had to go back to the last numbers sold, or the most current offer on a house. So if his house closes then the price he paid will be the new floor.

I should say this guy is a disabled Vet, so he wont have to pay property taxes, which afforded him about 20K more in a house that he could not afford otherwise.

I think as long as it's reason, the appraisers will always hit the offer numbers. Unless they are off by way too many zeros or the house is a McMansion in a urban hood or some shit like that.

golfplan18 says

Is a house worth whatever a buyer and seller agree upon, or do appraisers have a responsibility to kill deals when the number is too high?

Yes they should. The house is what the market says it is, it is what the house should sell for if it is foreclosed on. Other wise they will have 1500 square foot houses that the seller and buyer agree is worth $500,000 and ... wait, they already have that in California, don't they? Okay, what if the two of them say that house that should be worth less than $100,000 is worth $2 million dollars. So yes, the appraiser is necessary.

I think it depends on the nature of the deal.

An extreme example is cash - in which case, it doesn't matter, as an appraiser would not need to be involved - however, buyer beware.

The opposite extreme is where a mortgage is involved, which is backed/subsidized by taxpayers, as I believe is mostly the case now. If I am going to be subsidizing someone's mortgage (whether that is right or wrong is a different topic) I would want there to, at least, be a hint of checks and balances in the process...and for that process to be the least corrupted as possible, so as to not have another bubble/collapse.

A house should be independently appraised and valued according to comps, etc. That's the value, which is subject to the volatility of the market.

Taxes are assessed on the "value" of the house, as are mortgages. If the "value" is calculated using the amount paid, it opens the door to widespread fraud. (see "US Housing Bubble" http://en.wikipedia.org/wiki/United_States_housing_bubble and associated articles)

If the buyer wants to overpay, that's his & the seller's business. It doesn't mean that a house is worth $500k simply because someone is willing to pay that much for it. It certainly doesn't mean that the bank should make a loan based on the buyers/seller's agreed upon pricing.

Look at it this way; if a father sells his house to his son for $1.00, does that mean that the house is valued at $1.00? Hell, no.

All appraisals are pro forma. No appraiser for a residential shack ever killed a deal, unless they were colluding with the REALTOR to crush the valuation so the REALTOR could sell it to a straw for a subsequent flip.

Commercial jetliners, shopping malls, skyscrapers when the appraisal is commissioned by a third party with deep pocket interest in the deal.

The drive-by appraisal chicks know how to keep the easy money coming. The REALTOR tells you the number. You fill it in. You get paid.