- The home owner will want to think that he did a good transaction and so most likely he is going to be somewhat generous in valuating his own property.
- The Real Estate Agent in charge of selling the property want the listing and close the transaction. The Agent will try to offer a reasonable but maybe a little optimistic valuation.
- The Real Estate Agent in Charge of representing the buyer will want to provide a valuation mostly on the lower side to get the best deal for its client.
- The Appraiser will have its own opinion based upon his/her perceived understanding of where the market is at.
- The Buyer wants to have a "Good Deal".
- The Credit lender will not really care of the value as long as it makes some sense and the borrower qualify for its program. Credit lenders focus more on the Credit quality of their potential borrowers.
- The Hard Money Lender will care the most about the value because its the only protection they have for the loan.
Hard Money lenders are the most concerned about property value and here depending on the lender there will different way to estimate. Today for most of us consider appraisals not good enough, because an appraisal does not give us a property price that would reflect a sales of the property within 60 days. As a Private / Equity / Hard Money lender we need to think in term of worst case scenario most of the time.
What to use to valuate a property would be the MLS or multiple listing service. Other tools would be web site such as Zillow, Trulia etc... What information to look for are square feet, property condition, days on the market, number of foreclosure in the area if any, number of short sales in area if any. Availability of capital, if there is money available for loans value would be higher than when there is not enough. Today in the market its difficult to get a loan above $417,000.00 which is the conforming loan amount. The most standard a property is, the easier it will be to sell, the better its value will be.
As you can see, valuation is not an exact science and rely on so many factors. Taking all of this into consideration and sometimes, even more data, will give us an idea where we think the value of a property is. Because hard money lenders will have their own money on the line, their valuation will be on the conservative side. Most Hard Money lenders do not re-sale the loans they make on the secondary market, they keep them on their portfolio.
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