Expert: Russel Ray - 10/7/2008

Question
QUESTION: Hello,

I am currently interested in buying a new home which is listed for $400k. The house is being sold by the builder and has been on the market for over a year. I checked the tax profile on the house and it is has been appraised for 230k on the(Tarrant Appraisal District)webpage.  Should I make a bid lower than the listed price of 400k? I don't want to take advantage of the builder if he is desperate but again I don't want to hurt myself especially with the slumping economy.

Thanks,

gabriel

ANSWER: Hey, Gabriel.

How old is that appraisal? Generally, if you're financing your purchase, i.e., you're not paying all cash for the house, then you won't be able to buy the house for more than what the appraisal is.

One of the things you don't want to do when buying real estate is to feel sorry for the seller. Take care of yourself first because you can't predict the future as to what might happen, especially in this current economy.

As soon as you find out the date of the appraisal, and presuming that it's a recent appraisal (like within the past couple of months), you might have your Realtor call and ask why the house is listed at $400K with an appraisal for $230K. They might simply not have updated the listing price.

---------- FOLLOW-UP ----------

QUESTION: Thanks for the speedy response and advice. The appraisal is up to date. The land costs about 65k and the improvements are listed as 161k. So the total appraisal is 226k. I think the builder is trying to gain massive returns on his house. There are other homes in the area just as nice as his and are not selling. Should I try to meet him in the middle say around 310k?  

Answer
Hey, Gabriel.

You're still going to run up against the appraisal value if you're going to finance it so if the appraisal is new and at 226K, that's what the bank is going to finance.

No, in this market, I do not think you should try to meet him in the middle. If you want to pay full appraisal value, that's your privilege, but I would think no more. In fact, with property values still falling, by the time your new appraisal comes in for your mortgage lender, it might not be as high as it is right now.