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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