Q: My uncle wants to sell me his house in Mayfair for $80,000. I think it is too much for his house because it needs so much updating. You know… shag carpet, paneling and the whole ’70s vibe. Zillow says the house is worth $52,000! I do think it is worth more, but how can I find out exactly how much the home is worth?
A: You can and should find out how much the home is worth if you plan on buying it. While websites like Zillow can sometimes be good, they aren’t always accurate. You have a few better options.
1. Pay for an appraisal. If you are paying cash, this may be your best option. But if you are getting a mortgage and you pay for an appraisal before applying for a mortgage, this may sometimes prove be a waste of money. Since an appraisal is rather subjective, your mortgage company may come up with a different value.
2. If you are using a mortgage company to finance your loan, they will hire an appraiser to tell you exactly how much the home is worth after you enter into an agreement with your uncle and you apply for a mortgage. If you finance with an FHA loan, the appraisal is the last say. You cannot pay more for the house than the appraisal. If you finance with a conventional loan, it is possible to pay more than the appraisal, but the bank won’t lend you more than the appraised value.
3. Before you even go through the mortgage process, consult a real estate agent you trust and have them run the comps for you, and he or she can give you a general idea of the market value. While this is a very viable option to assess market value, your mortgage company will still be ordering an appraisal, so the numbers may not always match here either.
If your uncle is willing to sell you the house for less than market value, you are getting a good deal. If not, keep looking. Don’t do him any favors and pay more for the property than what it is worth just because he is a relative.
Stacey McCarthy is a real estate agent with the McCarthy Group of Keller Williams. Her Real NEastate column appears every Wednesday on NEastPhilly.com. See others here. Read other NEast Philly columns here.