Friday, August 20, 2021 / by Brad Brethouwer
Here’s why appraisals are having a hard time keeping up with high home prices.
Due to rising home prices, appraisals are becoming an incredibly hot topic in today’s real estate market. Essentially, an appraisal is an evaluation of a property’s value, and it’s used by lenders to ensure a home’s price is worth the loan amount.
In many cases, appraisals have been unable to keep up with market prices. People are also waiving appraisal contingencies in their offers, meaning that if the appraisal is low, the buyer has to pay the entire difference. Some buyers are offering to pay a certain amount of the gap, such as $10,000, if needed.
We’ve been telling our sellers to avoid getting too excited when they receive a high offer—nothing is certain until the appraisal comes in. For example, if the buyer offers to pay a $15,000 gap and the appraisal is $10,000 low, the seller is covered. If it’s low by $20,000, however, the seller may have to reduce their price.
It’s important to weigh the possibilities; you may get a high offer, but if the buyer isn’t offering to cover an appraisal gap, you might find yourself having to pay a big difference.
If you have any questions or would like more information about this topic, feel free to reach out to me. I look forward to hearing from you soon.