Brought to you by Scott P. Rogers, Funkhouser Real Estate Group, 540-578-0102, scott@HarrisonburgHousingToday.com
Brought to you by Scott P. Rogers, Funkhouser Real Estate Group, 540-578-0102, scott@HarrisonburgHousingToday.com
Tuesday, August 25, 2020
In today's local housing market we're seeing...
- high levels of buyer demand
- limited inventory of homes for sale at any given time
- as a result of the two items above, we're often seeing multiple offers on houses for sale if they are prepared well, priced well and presented well
- we're often seeing escalation clauses in some of those offers
- this sometimes leads to an appraised value that is slightly (or significantly) lower than the contract price
This disconnect (buyers being willing to pay more than appraised value) is likely because of how appraisals are defined and conducted.
An appraisal is an indication of the value of a property based on what other buyers have paid for other similar houses in the recent past - often the last six months.
What we now seem to be seeing is that today's buyers are willing to pay more for houses than buyers paid zero to six months ago - which can cause an appraisal to come in lower than the price that the buyer had agreed to pay for the house.
So, when there is a low appraisal, where do things go from there?
It's different in every transaction and it's all negotiable.
- Sometimes a seller is willing to adjust the contract price to be at or closer to the appraised value. Sometimes they are not willing to do so.
- Sometimes a buyer's lender is OK with the buyer purchasing the house even though the appraised value is low. Sometimes they are not OK with it.
- Sometimes a buyer's lender requires a buyer to bring extra cash to closing because of a low appraisal and the buyer is able and willing to do so. Sometimes they are not able and/or willing to do so.
- and on and on
If the appraisal on your house comes in low...
- Start by taking a look at the appraisal report to see if you agree with the appraiser's data and conclusion, or if you think something needs to be adjusted.
- See where the buyer is with things, especially if they were the winning offer of multiple other buyers that were making similar offers.
Current conditions in your segment of the local housing market will likely ultimately dictate what a buyer and seller will agree to do with a low appraisal.
