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A recent article on sheds some light on a problem in the real estate market right now. Home prices are rising faster than appraised values and that can be a problem for both the buyer and seller.

Let's say you find a home you want and you bid $200,000 for it. The seller accepts your offer, the bank is ready to loan, but the appraisal comes in at $178,000. How can this be?

The truth is that that the appraiser has to find other homes in your neighborhood that are similar and support the sale price. Those are known as "comparables." First, some of the comparable sales may be short sales from six months or so ago. Another consideration is that buyers are suddenly motivated and bidding against each other to get into a house and that drives the price up suddenly and maybe unrealistically. Between the cheap short sales and the enthusiastic bidders the appraiser has to determine a true "fair market value" which may be somewhere in between. That value is what your home would sell for if it was on the market and no one was desperate to sell or desperate to buy.

The bottom line is that the bank will not loan until they have a clear picture of the value of the home. Not the amount you want to pay, not the price the seller hopes to get, but what the home really is worth. Not an easy number to arrive at.

The good news is that the market seems to be settling down. As home prices continue to steadily improve and foreclosed properties are taken off the market, the appraisals begin to reflect the higher numbers and the banks loan more willingly.

What does this mean for your home? Ask a real estate professional at RE/MAX Flagstaff Realty to help you come up with a price for your home. They can show you what the market has been doing in your neighborhood and give you a realistic idea of what the appraiser will be taking into consideration. That can spare you and your buyer a lot of misunderstanding.

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