Appraisals and Why They're Dumb
Let's talk about why APPRAISALS are dumb! That's right. Your read that correctly. Appraisals are a necessary evil, but they aren't really designed to protect you, the buyer.
Can you guess who the appraisal is really protecting? Answer in the comments below if you think you know the answer. (The answer is in the video if you're not sure)
Alright, let's talk about appraisals and why they don't really matter when you're purchasing a home. I mean, they do and they're a necessary evil, but they're kinda dumb. Let's break it down.
There's a couple things to know. The first thing is, the appraiser is gonna get a copy of the contract, so they know what price you're trying to get to. Now, you might say, "Well, that's kinda dumb. "Why do they do that?" Well, they wanna make sure what the terms are, if they are reasonable, and really, at the end of the day, the appraisal, the whole point of it is to protect the bank. It's not to protect you as the buyer. It's to make sure that the bank is not getting swindled, that they're not just loaning you on a cardboard box. They wanna make sure that this makes sense, that they should do this. So, really, it's all about protecting the bank. And if the value's there, they can support it, then we're good to go forward.
If the value is below, well, then we have a problem. So, there's not really any incentive for the appraiser to give you more than what the sales price is, so don't be surprised if you have a contract for $500,000 and the appraisal comes back magically at $500K or $505K because there's not a lot of reason for that appraiser to say, "Oh, it's really $550K or $600K" Sure, they might, but there's not a lot of reason for them to stick their neck out.
When the market crashed in 2008, that was a hard lesson. A lot of appraisers got real conservative on their reports, and that's what a lot of this has to deal with, okay? The big take away here is don't be upset if you think you're buying a really good deal and the value is roughly the same, it's okay. It doesn't matter. So, that's it. If you have any comments or questions, leave them below. Thanks, guys!