Appraised value

[Anonymous]

In this market of economic uncertainty, is there ever a reason to pay more that appraised value for a house in South Dakota?

Is now a good time to buy or should we ride the market out further?

Thanks.

[ShanetheMortgageMan]

You know I haven't the slightest idea how the market is in South Dakota, I've been there once to see Mt Rushmore, and I remember the movie Badlands was shot in the Dakota badlands, but that's it.  I do know that you might be able to get a good feel of what direction the market is going by reading some real estate agents opinions at http://realtytimes.com/rtmcrtop/home.htm.  From clicking on a few areas within South Dakota it appears that it's siding a little on being a buyer's market and the prices are definitely not increasing, but are falling less than average.

Should you buy a home for more than it's appraised value?  There could be reasons to do so, like if you see potential in the property that others do not, it is your dream home, it holds sentimental value, etc.  So that question is a bit more specific than one might first think.

What are your own reasons to want to buy, or not buy, now?

[Anonymous]

Yes, the market in South Dakota is falling.  My problem is that the house we found (based on location) has an asking price of $296K.  It appraises at $240K.  In 2007, we took a loss on the sale of our house in Omaha.  Since then, we have been sitting in an apartment recouping the loss.  We prefer buying vs. renting.  We have no reason not to buy as we are fully qualified VA buyers.  After talking with realtors and not getting a straight answer (why would they? their salary is based on commission), I talked with an appraisor's office.  She indicated that we should not pay more than the appraised value.  In my mind, we sure should not pay more than the appraised value as this particular has been on the market since 2005 and has yet to be owner-occupied.  Thanks for your input.

[ShanetheMortgageMan]

Where did you get the appraised value from?  It sounds strange someone would try to sell their home for $50k more than what it would appraise for - they should realize that anyone getting a mortgage (such as yourself) would have to bring in the difference between the appraised value and sales price, and then their down payment on the loan (which in your case VA doesn't require one) in order to close on the home.

[Anonymous]

I got the appraised value from the Lincoln County Online Property Tax Payment System under valuations, assessed value.  http://www.lincolncountysd.org/PropertyTaxPayment/  I asked both the county worker and the appraiser's office if that was the right site to obtain information from because I know different states do it differently.  They both responded in the affirmative.  The home is a spec house owned by a (very prolific) builder.  But, I'm still of the persuasion that this builder has lost touch with reality.  Any advice you have based on this additional info would be appreciated.  Thank you kindly.

[Anonymous]

Generally the assessed value you get from the county Tax Collector's office is much lower than the actual appraisal value you'll get by hiring an appraiser. For example my home's assessed value (per the tax bill I got yesterday) is $123,417. We sold our home for 206k.

You'd have to hire an appraiser to get the actual market value, but of course you don't do that until after you have a contract for the house. Have you checked comps?

[Anonymous]

My idea in checking with both an appraiser's office and the county was to find out if there was a large disparity between the two assessed values in this particular county.  For example, in Omaha, it seemed to be a commonly known fact that the Tax Assessor's assessed value was approx. 3% less than the true market value.  In our case, neither was true.  We paid taxes on $143ish and were only able to sell for $126ish.  But, lesson learned, thus the question about not paying more than appraised value.  When we bought that house, it was still in the times when appraisers were appraising for whatever the house price was.  Is that still the case or can I get a fair appraisal?  I know it used to make a difference in whether you were buying a house, selling a house, or getting a second & they would ask you right up front.  In this case, the comps are not too helpful.  It is in a subdivision that ranges from twinhomes to mansions on a golf course.  This actual house has not be rebuilt in the subdivision nor has it sold.  Hope this helps.  Thanks.

[ShanetheMortgageMan]

You can hire an appraiser to do an apprasial without being under contract (if the homeowner let's the appraiser in) and without having any "price in mind", the appraisal will just be useless to the mortgage lender.  Like desifink said, the assessed value usually is not the fair market value.  Here in California the assessed value is the sales price, minus a $7k homeowners exemption if it's owner occupied.  I remember looking up some values in Illinois and the assessed values were less than 1/2 of the fair market value.  Since there isn't any "formula" that fits all of the assessed values, rarely will seasoned homebuyers use that as any sort of gauge of value, other than to determine how much their property taxes might change once it gets re-assessed.  Sales history of the property, along with comparables to it, are the best indicators.

[BrianB_The_Loan_Professor]

In this market there is never a reason anywhere that I can think of to justify paying 20% more than appraised value - but I am talking about a current market appraised value NOT the assessors value - the two rarely are the same.

Good luck

Brian

[Anonymous]

Thanks to all of you for your input!  I feel like I have more information to make an informed consumer decision after posting on this board & receiving feedback.  I don't know yet what our decision will be.  However, we just spoke with a realtor that specializes in foreclosures.  He said there are 750 coming up in the next 6 months, so maybe patience will be in our favor at this time.  Thanks again for all of the feedback!