Home Appraisals and Their Role in Real Estate

Home appraisals are an integral piece of the real estate puzzle and as such, they can be used as indicators regarding how the market is faring. The relationship between the real estate market and appraisal values basically follows the trend that when the market plummets, sales are more often derailed by low appraisals that fall short of the home’s selling price. Recently, appraisers are putting higher values on homes again creating an environment that allows more deals to go through. Between the years of 2008-2010, a Seattle-based firm reported 1/3 of their sales as coming in under below the selling price forcing the agents to get creative. One such agent would make sure the appraiser could not get in the house alone and make the situation so that the agent could be there with the appraiser along with a packet of comps in the area so the home price could be tangible explained and the deal would be saved. 

Scenario: “For example, if a home cost $500,000 and required a 20% down payment of $100,000, the buyer would need to finance $400,000. But if the appraiser valued the home at $450,000, the buyer would only be eligible for a $360,000 loan -- making the home too costly for some buyers.”

The combination of home prices edging up and the housing inventory shrinking has built an environment which sees more and more appraisals coming in at or above their selling prices. Having a real estate market with above the selling price appraisals with have a new and unforeseeable impact on deals, but we will soon see what that market looks like as we are moving that direction more and more each day!



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