It doesn't really matter what you or I think the value of the property is.............
I had an email conversation this week with one of my buyers.
It's a conversation I've had many times.
What price to offer on a home is the question.
Of course there are many variables when computing what to offer.
It usually starts with comparable sales that I pull up.
Once in a while, my buyer has something to say about that also. They may have knowledge of a property that closed escrow nearby. But sometimes that property isn't like-for-like, or perhaps the sale is to old to be considered a comp.
My buyers concern was overpaying for the property.
I re-assured them by stating that it really doesn't matter what I think or they think the fair market value of the property it.
What really matters is WHAT THEIR LENDER thinks the fair market value of the property is.
Why? Because their lender is only going to lend them 80% (in the case of a conventional loan), or 96.5% (in the case of an FHA loan) of the value from THEIR appraisal.
So in that sense, there's really no need to worry about overpaying. Your bank will pretty much dictate what fair market value is for the property, and the sale is contingent upon the property appraising at the accepted purchase price.
That almost always puts my buyers at ease knowing that the whole purchase process has to jump through several hoops of valuation by different parties
