Appraisals & Buyers Not Meeting Eye-to-Eye
We’ve all known how busy this real estate market has been – so it should come as no surprise that potential homebuyers aren’t meeting in the middle when it comes to home appraisals.
According to the latest REALTORS® Confidence Index survey, 23% of contracts were delayed because of appraisal issues.
What does this mean for the contracts?
When a home appraisal comes in too low, unfortunately – both parties have to come back to the negotiation table to sort out a new deal. Lenders tend to only offer loan amounts for the appraised value of the home; so either the sellers agree to a lower price, or the buyers pay for a portion of their deal out of pocket.
But a hot real estate market usually means buyers have to bid in order to keep up with their offer. Why are home inspections, seemingly, “ruining” this prospect?
Well, to better protect buyers. Home inspectors have a protocol and assessment for valuating a home to help buyers from overpaying. In a hot market (like it’s been), it’s definitely harder to pinpoint where the value of a home is for the seller and buyer. However, because buyers are feeling the need to set themselves apart from others, some are waiving appraisals.
In the survey, about 12% of these stalled transactions were then terminated because of the appraisal issue.
Shawn Telford, Chief Appraiser at CoreLogic, explained to The Wall Street Journal, “I don’t remember any time where the frequency of buyers willing to pay so much more than the market data was this high.”
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