In today’s housing market, we are seeing high demand and low inventory — and when this happens, prices naturally rise. Thanks to these home sale prices appreciating at near-historic rates, certain challenges have arisen with regards to appraisals.
For the last few months, it has become more and more common for an appraisal to come in below the contract price on a home. Chief appraiser for CoreLogic Shawn Telford explains, “Recently, we observed buyers paying prices above listing price and higher than the market data available to appraisers…this difference is known as the appraisal gap.”
Put simply, because of skyrocketing buyer demand, prospective homeowners are often willing to pay over asking to secure their dream homes. However, when an appraiser comes in, they look objectively at the inherent value of the home in today’s market regardless of what monetary offers have been made. An appraiser’s end goal is to ensure the lender is not loaning more money than the home is worth.
So what does this mean for you? Basically, if you encounter an appraisal below the contract price, the most common approach is for the seller to ask the buyer to make up the difference in price. As a buyer, it’s important to be prepared to bring extra money to the table if this happens and you truly desire the home.
And if you come up against an appraisal gap, I can help you understand your options and handle any additional negotiations. Questions??...call me today and follow me on Instagram: .....I'll follow you back!
Source: Keeping Current Matters