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      08-26-2014, 01:05 PM   #1
FwdFtl
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1st Time Homebuyers

Wifey and I are in escrow for a house. I've been reading articles and doing some research about real estate in general. Here's my question:

Our lender uses their own approved appraisers and they valued our soon to be home at $55k over the asking price. Logically to me that would mean we instantly gained $55k in equity. Is this the case?

Also just to let you know how fortunate you guys are in other states, a 4 bdrm/2ba 1,600 sqft goes for around $500k in 91001. Our home was a flip, but it's turn key and pretty damn nice!

Any experienced advice would be much appreciated for us 1st time home buyers!

Last edited by FwdFtl; 08-26-2014 at 01:30 PM.
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      08-26-2014, 01:22 PM   #2
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Congratulations on the new home!! Like holding a stock, you don't actually realize that "gain" until you sell for $55k more than you bought it for! But with an appraised value above your purchase price, you technically have more equity in the home and could therefore borrow against that equity through a home equity line of credit from your bank. Rates for home equity lines are higher than mortgage rates but much lower than credit cards. You can borrow for any thing including additions/renovations to the home, paying for kids college etc...

And I hear you on prices. My 3 bdrm/3.5 bath 2,300 sq. ft. house was $850k...
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      08-26-2014, 01:28 PM   #3
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With all you Californians moving to central Texas, we are now seeing prices like that here as well. Thank you!
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      08-26-2014, 01:30 PM   #4
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I don't know how average people are able to afford these houses. My 1400 sq ft house 2 br, 2 ba house is 256k w/ all updated appliances and granite counter tops/vanities throughout.

Anyway, the house is 'worth' what the market will pay. If you're paying for pmi and the house was valued 55k higher, you might be able to use that to your advantage by getting a home equity loan to pay for a down payment to get to 20% down. Will need to play with #s to see if it's worthwhile.
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      08-26-2014, 01:33 PM   #5
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Quote:
Originally Posted by kscarrol View Post
Congratulations on the new home!! Like holding a stock, you don't actually realize that "gain" until you sell for $55k more than you bought it for! But with an appraised value above your purchase price, you technically have more equity in the home and could therefore borrow against that equity through a home equity line of credit from your bank. Rates for home equity lines are higher than mortgage rates but much lower than credit cards. You can borrow for any thing including additions/renovations to the home, paying for kids college etc...

And I hear you on prices. My 3 bdrm/3.5 bath 2,300 sq. ft. house was $850k...
Awesome news to me and thank you! $850K? my goodness, must be a really nice house though

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With all you Californians moving to central Texas, we are now seeing prices like that here as well. Thank you!
HAHA

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I don't know how average people are able to afford these houses. My 1400 sq ft house 2 br, 2 ba house is 256k w/ all updated appliances and granite counter tops/vanities throughout.

Anyway, the house is 'worth' what the market will pay. If you're paying for pmi and the house was valued 55k higher, you might be able to use that to your advantage by getting a home equity loan to pay for a down payment to get to 20% down. Will need to play with #s to see if it's worthwhile.
Hey, who you callin average?

We actually put 20% down so no PMI is necessary.
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      08-26-2014, 01:35 PM   #6
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Be prepared to empty your wallet! Congrats!
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      08-26-2014, 01:41 PM   #7
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Congrats on the purchase.

Talk about bring fortunate. $500k usd would get you about a 400sqft apartment in HK in a crappy area. And yeah Vancouver is pretty pricey too. $1m pad in HK and Vancouver would get you a pretty below average place. $2m would be decent. #1 and #2 most unaffordable city in the world yay! Fml
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      08-26-2014, 01:41 PM   #8
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Be prepared to empty your wallet! Congrats!
Thank you!

Well, considering it's a turn key home and the inspection went pretty well, I THINK we may be good.

Overall, the house is fundamentally sound. Pipes, electrical, roof, foundation, alarm etc... came out great. I can see some additions to the backyard like new grass and a fence to hopefully house a new German Shepherd!
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      08-26-2014, 01:44 PM   #9
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Congrats on the purchase.

Talk about bring fortunate. $500k usd would get you about a 400sqft apartment in HK in a crappy area. And yeah Vancouver is pretty pricey too. $1m pad in HK and Vancouver would get you a pretty below average place. $2m would be decent. #1 and #2 most unaffordable city in the world yay!
Thanks man!

Based on that info, I actually feel even better! haha $2M is decent home? Yikes
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      08-26-2014, 01:49 PM   #10
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Quote:
Originally Posted by FwdFtl View Post
Wifey and I are in escrow for a house. I've been reading articles and doing some research about real estate in general. Here's my question:

Our lender uses their own approved appraisers and they valued our soon to be home at $55k over the asking price. Logically to me that would mean we instantly gained $55k in equity. Is this the case?
No. Appraisals are a crapshoot. Residential real estate as an investment is a crapshoot. Over the past hundred years, it's pretty much tracked inflation, with some ups and down. From 1900 to 1995, inflation adjusted house prices went up about 7%. That's about 0.07% a year. For comparison, the Dow-Jones increase, inflation adjusted, from 1913 to 1990 was about 200%, or 2% a year. Including the spasms since 1990 just muddies the water.

So, first time homebuyer, buy your house for housing. As an investment, you may win, you may lose. Just like any other investment. Don't waste too many brain cells on it.

The biggest investment value to you is likely your monthly principal payment. Needless to say, borrowing against your house can wipe that out.
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      08-26-2014, 01:52 PM   #11
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My purchase was a breeze. I ended up buying the same house I was renting for three years. At closing I already had the keys.
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      08-26-2014, 01:52 PM   #12
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Quote:
Originally Posted by FwdFtl View Post
Our lender uses their own approved appraisers and they valued our soon to be home at $55k over the asking price.
are these "approved appraisers" going to be there or be used if you want to sell your house in the future ??

doubt it...because those appraisers work for your lender - they can tell you anything they want, doesn't mean the Appraisal District that overseas your house and property is going to appraise it the same......

I'd rather use legit appraisers that won't fill my shoes with shit before I put them on...
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      08-26-2014, 01:55 PM   #13
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new German Shepherd!
hey black guy - you're doing it wrong....

get a Pitbull and follow all the awesome stereotypes.....
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      08-26-2014, 02:02 PM   #14
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are these "approved appraisers" going to be there or be used if you want to sell your house in the future ??

doubt it...because those appraisers work for your lender - they can tell you anything they want, doesn't mean the Appraisal District that overseas your house and property is going to appraise it the same......

I'd rather use legit appraisers that won't fill my shoes with shit before I put them on...
Ah, I see what you're saying. But, if we we're to refinance against our house (just for illustrative purposes) through our credit union wouldn't that mean the higher appraised value would be used? I do believe the appraisers they use are legit! But hey, I'm new to the game for now

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hey black guy - you're doing it wrong....

get a Pitbull and follow all the awesome stereotypes.....
FAWK that. So I can get shot by the cops in mid daylight for meeting the description of alleged suspect? (No diss to all cops) PASS Lol
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      08-26-2014, 02:08 PM   #15
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Honestly you really don't want a high appraisal on your home in the short term unless you plan on selling it very soon. An increased appraisal increases your property taxes.

Some people even seek professional help to lower their appraisal values as much as possible.

That $55k increase in appraisal value over asking price is bad news to you if you plan on living in this home for the long haul.
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      08-26-2014, 02:26 PM   #16
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Congrats

$500k in MA is nothing...gets you a decent home in the burbs

In the city....gets you a shack lol
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      08-26-2014, 02:28 PM   #17
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Quote:
Originally Posted by FwdFtl View Post
Thank you!

Well, considering it's a turn key home and the inspection went pretty well, I THINK we may be good.

Overall, the house is fundamentally sound. Pipes, electrical, roof, foundation, alarm etc... came out great. I can see some additions to the backyard like new grass and a fence to hopefully house a new German Shepherd!
I wasn't dissin' the type of house just being a homeowmer in general. After we bought our house i was like were the hell did all my savings go?
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      08-26-2014, 02:41 PM   #18
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Quote:
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Ah, I see what you're saying. But, if we we're to refinance against our house (just for illustrative purposes) through our credit union wouldn't that mean the higher appraised value would be used?
I dunno - not just any appraiser will dictate how much your house is appraised at...

only people that can legitimately appraise our house is the Houston Appraisal District.....



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FAWK that. So I can get shot by the cops in mid daylight for meeting the description of alleged suspect? (No diss to all cops) PASS Lol
#handsupdontshoot
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      08-26-2014, 02:41 PM   #19
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Awesome news to me and thank you! $850K? my goodness, must be a really nice house though
Nope, pretty standard for this part of New Orleans. It is 120 years old but beyond that, nothing spectacular.
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      08-26-2014, 02:45 PM   #20
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I'm no real estate expert. But I've purchased 3 homes and have gone through a couple of refinances of my current primary residence. First, based on my experience, any time you're dealing with a bank, I had to use the bank's appraiser. Period. There was no wiggle room on this. If I had an appraisal which was done recently enough, the bank's appraiser may or may not use this to determine the value of the home. For a refinance, the bank also may elect to do a drive by appraisal where the appraiser just looks at the house to just make a quick determination of condition and then what the neighborhood is like. A drive by costs less than a full blown appraisal.

The other appraisal which can be done is called an automated appraisal where the bank can run the property against some sort of system which generates a value based on public records and the like. Some refinances are eligible for this and I think it's more based on when the last appraisal was done on the house.

For property taxes, it is my experience in my area, the county and state does not look at any appraisals done for sales or refinancing. I know my official property value as stated by my local government is no where near what the market value is. There is typically a lag between what the local government feels your property is worth versus market value. Sometimes this isn't the case. Such as during the housing crash. I was paying more on property taxes as my local government had my current house value higher than what the market was. This is due to when they did the assessment on my house. Once the assessment was done, it locks in the value they set for 3 years. My local government does do a phased/stepped approach in when you ultimately get hit with the full taxes of this assessment. The only option you have to contest this is to hire your own appraiser. But many times, the local government will likely not rule in your favor.

To me the appraisal industry is a bunch of scam artists and is legalized extortion. This opinion has been formed through my personal experience with appraisers and backed by others in the real estate business.

Anyways, congratulations on your home purchase.
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      08-26-2014, 03:29 PM   #21
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Congrats

$500k in MA is nothing...gets you a decent home in the burbs

In the city....gets you a shack lol
it's 500k because 91001 is susceptible to mudslides and wildfires. slightly south of there the price jumps.
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      08-26-2014, 03:44 PM   #22
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An increased appraisal at this point is not a good thing, it likely means that your property taxes will increase. Looks like you might need to hire someone on contingency that will fight the city to get your appraisal down. They aren't hard to find.
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