Ask Phyllis: a blog series of frequently asked real estate questions.
Appraised Values
Dear Phyllis,
I enjoy reading your real estate advice and don’t recall you addressing appraised values. My daughter recently took a second mortgage to build an ADU on her Tustin property. Before construction started, she received a job opportunity in Tennessee. At the time of the second mortgage, her home was appraised at $1,200,000. Because of the move, she listed her house for sale and is currently in escrow for $1,185,000 – lower than her recent appraisal. The buyer has completed their inspections and wants a $25,000 credit for a new roof, termite repairs, tenting, and to address some drainage issues. I recommend that she decline as the home is worth $1,200,000, and she is already selling for $15,000 less than the value. I would love to have you weigh in on appraised values.
Lottie
Dear Lottie,
Thank you for being a loyal reader! Appraised values provide an appraiser’s opinion of value at a specific moment. However, a home’s value is simply what a buyer is willing to pay.
Keep in mind that the appraiser is likely unaware of the needed termite repairs, tenting, and drainage issues. Additionally, while he may have noticed the age of the roof, there’s also a chance he didn’t.
Although the home appraised at $1,200,000, current market conditions dictate a sale at $1,185,000. This reflects what a buyer is willing to pay today. Declining the credit may risk the buyer walking away, potentially leaving the property on the market for longer or inviting more concessions from future buyers. That said, a few strategies could be considered:
- Negotiate a smaller credit
Based on priorities, your daughter could offer a reduced credit or agree to handle only the termite tenting or drainage. This compromise could keep the sale moving forward. - Get quotes for repairs
- If possible, she could obtain estimates to determine whether the $25,000 request is reasonable and negotiate accordingly.
- Reassess market
Depending on how the local market is performing and how long the home has been listed, it might be worth considering if holding firm is a viable option.
I hope this helps you give your daughter some further insight.
