Pat Butler
Senior Member
- Joined
- Jan 17, 2002
- Professional Status
- Certified Residential Appraiser
- State
- Illinois
I live in a rapidly developing area, and during our busy season during the spring, many houses sell for more than list price due to multiple offers from different buyers.
I would agree that a sales price that exceeds list price is a transaction that needs to be carefully analyzed, but isn't necessarily indicative of a property that has to underappraise.
Whether or not people should pay more than list price is a personal decision. But that fact is, people DO pay more than list price in some hot markets and that may be a good indicator of market value if it is a common practice.
The fact is, some people also list their house below market value accidently or through ignorance of the market. So if you appraise a house at $100K then they list it at $10K then next day, would you agree that no one should pay more than $10K? That's an extreme example but illustrates the faulty logic of assuming that a house isn't worth more than its list price.
All in all, a careful analysis has to be made of the subject's listing history. If the property was on the market for a longer than normal amount of time and properly marketed, THEN sells for more than list price--- then that transaction is more likely to be the type that would underappraise.
Pat
I would agree that a sales price that exceeds list price is a transaction that needs to be carefully analyzed, but isn't necessarily indicative of a property that has to underappraise.
Whether or not people should pay more than list price is a personal decision. But that fact is, people DO pay more than list price in some hot markets and that may be a good indicator of market value if it is a common practice.
The fact is, some people also list their house below market value accidently or through ignorance of the market. So if you appraise a house at $100K then they list it at $10K then next day, would you agree that no one should pay more than $10K? That's an extreme example but illustrates the faulty logic of assuming that a house isn't worth more than its list price.
All in all, a careful analysis has to be made of the subject's listing history. If the property was on the market for a longer than normal amount of time and properly marketed, THEN sells for more than list price--- then that transaction is more likely to be the type that would underappraise.
Pat