When supply is low and demand is high, prices rise. That’s what’s happening in today’s housing market. Home prices are appreciating at near-historic rates, and that’s creating some challenges when it comes to home appraisals.
It’s become increasingly common for an appraisal to come in below the contract price on the house. Because buyers are paying prices above listing price and higher than the market data available to appraisers to support a higher appraisal value. This difference is known as “the appraisal gap”.
Basically, with the heightened buyer demand, purchasers are often willing to pay over asking to secure their new home.
When the appraiser comes in, they look at things a bit more objectively. Their job is to assess the inherent value of the home, so they’re going to study the facts and use the data available to them. Their goal is to make sure the lender isn’t loaning more money than the home is worth. It’s objective, rather than emotional.
The best thing a buyer can do is understand how appraisal gaps may impact your transaction if you’re buying or selling. If you do encounter an appraisal below your contract price, know that in today’s sellers’ market, the most common approach is for the seller to ask the buyer to make up the difference in price. Buyers, be prepared to bring extra money to the table if you really want the home.
Above all else, lean on your real estate agent. Whether you’re a buyer or seller, your trusted advisor is your ally if you come up against an appraisal gap. We’ll help you understand your options and handle any additional negotiations that need to happen.
Whether you want to buy or sell a home locally or globally, I can help you finding or selling your home so you can create the life you love! ☎️ 706.530.1114 or email us.
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