Stock Trading and Other Things

What is the difference between the brokers price and appraisal?

I'm looking to purchase a home in Prichard, AL and it is worthless. The home needs to be torn down. I have contacted the bank and they are willing to sell the home based on the brokers price or the appraisal. I'm looking for the lowest value, so it can be the cheapest price. The way I see it, I'm buying the home for the lot and not the home, but the appraisal will average in the comps in that area. I'm sure this will drive the costs up, right? What should I do?

Public Comments

1. A Realtor or Broker can perform a "Market Analysis" for you. This market analysis is based off of homes that have sold in the last six months in that specific area. If they don't have sales in that specific area they will find a similar area close by. It is similar to a professional appraisal that is performed by a certified professional "Appraiser."

Also, please realize the home may be worthless to you but it may not be worthless to the owner or the bank if they feel it is viable.

Many people have been known to do a tear down where the home is in decent condition; they just like the land especially if land is scarce in the area so that they can build the home they choose.

The home will also be worked up based on the value of the land and the structure along with the sales in the area. If the home is in disrepair than the Realtor or Appraiser will surely take that into account and their analysis or appraisal will reflect the comparisons to the others who are in good condition. I can assure you of this.

If you are presently working with a Realtor you can request that she/he perform a "Market Analysis" for you and there is no charge. If you contact a professional "Appraiser" than you will be charged for his/her services.

If you are not working with a Realtor, I would use an Appraiser. I hope this helps.

If you want to get a broad view I would use a Realtor and an Appraiser. That way you will have two opinions.

These opinions are to the best of my knowledge as a former active Realtor.

2. I think a broker or an appraiser would both value a property as is: the broker by what he thinks it would sell for, the appraiser for fair market value based on comps. But either could value it as a tear down if asked. They would probably compute the value of the unimproved lot, less the cost of demolition.

Who comes out lower depends on whether prices are rising or falling in the area. The broker's estimate will be closer to current conditions based on his knowledge of the current market. The appraiser's will be based on comps from an earlier market.

3. Well, here in Washington a brokers price will be the market value that the broker (or agent) feels it can actually sell for. This usually costs less than an appraisal too. It's my understanding that banks forclosing on a house may use a broker to assess the homes market value.

An appraiser will do a thorough job of appraising a home using the comps etc.(broker uses comps too) and documenting it all. An appraiser can also take into account though that the home is a tear down. So you may be ok either way, but I think I'd tend to go with the brokers price as they may be able to be more subjective.

I'm surprised though that the bank doesn't want to use their own broker or appraiser.

4. Am a retired real estate broker of 30 years -- with 4 years' experience performing a BPO (Broker Price Opinion) for Source One Services, one of the largest real estate "fair market value" suppliers to mortgage/lender clients. Their clients (Countrywide, Litton, Bank of America, CitiFinancial, Wells Fargo, etc.) need realistic values for properties (foreclosure, refinance, home equity, etc.) purposes.
Resources for construction of a Comparable Market Analysis (CMA) report (... or BPO, whichever you choose to call it) are gathered from the local County Appraisal District and (if a REALTOR) MLS (Multiple Listing Service) recently sold properties that are comparable to the subject, making adjustments for positive and negative conditions of the subject.
BPO/CMA details are prepared for different purposes...just as Certified Appraisals. Some are court-ordered for divorce values; some are for taxation purposes; others are for marketing reasons (i.e. to sell in a reasonable length of time for the best price a buyer would pay), etc.
I was paid $40-90 by Source One Services to take pictures of the property, follow online Internet formula of comparison of properties that were within a certain distance and similarity of the subject (using 3 or 4 active properties on the market and 3 or 4 sold properties that met distance and smilarity). My track record was very good -- even though the Service had a previous BPO/CMA and/or a Certified Appraisal.
Bottomline: CMA/BPO's are less expensive for the client -- they're generally free if listing the property for sale in the marketplace. Certified Appraisals can cost $200 to $500 depending upon size, number of improvements, condition, etc. Either way, value is determined by comparison and adjustment to similar properties -- Certified Appraisals encompass a "cost" of replacement and "economic use" factor. Since you are not concerned with "cost or economic use", the less-expensive CMA/BPO may well serve your purpose.