What’s a House Worth?

When a buyer is paying cash, a house is worth what a seller is willing to sell for and what a buyer is willing to pay.  When there’s a loan involved, the house is ultimately worth what an appraiser determines. Appraisers base their values on what has sold in the last six months, in similar neighborhoods, with similar characteristics, adjusted for notable differences. Ideally, the homes used for “comps” (or comparable) should be of the same type of structure with similar square footages and features. This means that if you’re looking at a two story, 2500 sq ft, 3 bedroom, 2 bathroom home that the comparable homes would be as close to the subject property as possible. The more differences in the homes you are trying to compare, the more adjustments have to be made for a reasonably accurate comparison.

A CMA (Competitive Market Analysis) is NOT the same as an Appraisal! Realtors base comps on major items, such as square footage. An appraiser will base their value on several more detailed factors.

Most of the time an appraised value is going to come in equal to the purchase price. Why? If a Realtor has determined a realistic value of a home when they listed it for sale based on the CMA’s, then the appraiser’s more detailed report will USUALLY fall in line with that value. There can be glaring differences when an appraiser is from another city, doesn’t quite understand the specific market, or any number of other factors. It is more common for a house to appraise LOWER than the purchase price than it is for a house to appraise HIGHER.  You can learn about low appraisals here.