The Seven “Values” of Housing

  1. Assessed
  2. Refinance appraisal
  3. Recent comp sale
  4. Original list price
  5. List price reduction
  6. The actual sale price (market value)
  7. Buyer’s lender appraisal for purchase
  1. The city/county ASSESSED value – this is the number that the assessor has placed on the house in order to calculate the taxes.  Years ago this number was generally seen as 20% - 30% under the market value.  In recent years however this number has been increased at a rate MUCH beyond the actual market values to increase taxes for the municipality.  Today, homeowners may find their ASSESSED value either above or below the actual sale price of their homes.
  2. The APPRAISED value – this is a written report done by a certified residential appraiser – typically done when a buyer refinances their house.  Before the housing bubble these appraisals were generally regarded as “generous” to allow the borrower to feel comfortable borrowing against the perceived equity they believed they had.
  3. The COMP (comparable recent sale).  What the SIMILAR house has sold for within the past 4-6 months.  This comparable value estimates what a similar house would sell for today – in a stable market.  In an appreciating market the sales will be slightly higher than the comps.  But in a declining market, the eventual sales will often be slightly less than the comps.
  4. The ORIGINAL LIST price – is not the value of anything. It’s the “wish” of the seller and often the highest of the seven different numbers. This is the “bait” to attract buyers.
  5. The REDUCED price – again, the value of nothing – but now the attractive “bait” that makes a buyer want to make an offer and start the process.  Ideally, the original list price is the right “bait” and there is no need to reduce the price.  However, if a house is listed for 60 days and there is no offer, then the asking price is the wrong “bait”: too high over the market value.
  6. Once a buyer and seller agree on a price, this becomes the MARKET VALUE.  This is the true value of any property and it will become a COMP for the next area sale.
  7. Even if a buyer and seller agree on the market value, the buyer’s lender requires an objective certified residential appraiser to justify to the bank that the buyer is paying market value for the house by using comparable sales.  If this PURCHASE APPRAISAL is less than the agreed upon price it can kill the sale by denying the buyer their financing.

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Matt Schwind

Licensed In IA, IL
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Bettendorf Office

1228 Middle Road
Bettendorf, IA 52722