As an experienced Realtor, this should be an easy question - right? Well not-so-fast.
From Wikipedia: Fair market value is an estimate of the market value of a property, based on what a knowledgeable, willing, and unpressured buyer would probably pay ti a knowledgeable, willing, and unpressured seller in the real estate market.
The amount of money a knowledgeable, willing, and unpressured buyer would pay....
Well I can assure you; most buyers are willing, knowledgeable and unpressured in THIS type of Real Estate market!
From Business school to real-world use, I have always looked at the Fair Market of a good or service (or a house) as what a consumer is willing to pay. The problem is, as we are all aware - is that banks and lenders are backing loans for these purchases. In order to protect them - the banks charge a $400-$500 fee to the customer for an appraiser to assess if the buyer is paying too much and thus determines how much of a loan the bank will grant.
(Can you imagine what would happen if credit card companies did this for durable goods? I'm sorry ma'am those Jimmy Choos are only worth $30 not $300 - you will need to use cash).
The Problem:
Stricter (and needed) lending standards have put in place a much more random system with regards to Appraisers. Instead of Mr. Loan Officer calling the appraiser he always uses in NW DC; he "orders it" from a 3rd party. The 3rd party then at random picks an appraiser to come out and tell the bank (and the customer) how much its worth.
So the likelihood of getting an appraiser from the burbs, who is not as familar with this neighborhood is MUCH greater. Well does that make a difference?
Think about your own neighborhood you live in now. Now think of a similar home a mile or two away in a different neighborhood. Your home can look alike; be about the same size - but is the value the same? Probably not - but you know that because why? You LIVE there - you KNOW the areas and you ARE an educated buyer or seller.
So here is a stranger who may be an expert on appraising a home - but does he 'know' the neighborhood differences? Let's hope so - because he is one who decides what your home is worth.
Contact James Downing of the Downing Real Estate Group, if you are selling, buying or have questions! Office: 202-362-5800 Cell: 703.244.3971 Licensed in Washington DC, Virginia & Maryland. Coldwell Banker Residential Brokerage - Chevy Chase
5028 Wisconsin Ave NW Suite 100 * Washington DC 20016
