We continue to be in a seller’s market, which is affecting how appraisals come in for homes under contract. I’ll explain everything in today’s video.
Today I wanted to talk to you about what’s going on with appraisals in the current market. In our last video, we gave you a snapshot of what the market currently looks like from a supply and demand perspective.
Currently in our market, we have high demand and a low supply of homes, which is causing home prices to increase. So how is this affecting appraisals for the sellers that we work with? We’ve had more instances this year than in recent memory where we get a home under contract for a certain value, and the appraisal comes in lower than that value. This is a problem.
Why are we seeing lower appraisals? Appraisers are looking back over the last three to six months of sales in the area, comparing similar homes to the seller’s, and coming up with their opinion of the value of the home based on those factors, as well as any improvements or updates done to the home.
In my opinion, the true market value of a home is what the seller and buyer agree on, but the banks have to protect themselves. Because of this, we’re seeing these low appraisals. I still continue to encourage sellers to list their home at a price that is a little higher than the homes that sold recently in the area, especially in this current market.
If you find yourself in that situation where the home appraisal is lower than the purchase price, you have a few options to take care of that problem. You can reduce the price down to the appraised value, the buyer can pay that difference in cash, or you can meet somewhere in the middle. Some buyers aren’t willing to pay the extra money, and the low appraisal can kill your deal.
If you get a cash offer for your home, it might be worth it to really consider taking that deal. Most cash buyers don’t spend the extra money on the appraisal, so you don’t have to worry about it.
If you have any other questions about this topic or there is anything we can do for you, a friend, or a coworker, give us a call. We’d be happy to help!