Low Appraisals Stall 23% of Home Sales

Home buyers are bidding up home prices in competing for the home they want. But appraisals don’t always agree with that final seller’s accepted offer price. Some homes are appraised below the agreed-upon sales price, which could upend a deal.

Twenty-three percent of contracts were delayed due to appraisal issues, according to the latest REALTORS(R) Confidence Index Survey, based on a survey of real estate professionals’ transactions. About 12% of transactions were then terminated due to appraisal issues.

“I don’t remember any time where the frequency of buyers being willing to pay so much more than the market data was this high,” Shawn Telford, chief appraiser at CoreLogic, told The Wall Street Journal.

Buyers are stretching their budgets to win a bidding war. But mortgage lenders will usually only offer a loan amount for the appraised value of a home. When a home appraises too low, parties must come back to the negotiation table. Sellers may need to agree to lower the price or buyers may have to come up with more money on their own. Or the deal may fall through.

Appraisers usually factor in recent closed and pending sales to determine the value of a home. But a sale can close in a month or two after going under contract. In a fast-moving market, some home sellers complain that appraisals aren’t keeping pace.

Appraisers told The Wall Street Journal that they have a thorough assessment for valuating a home that goes beyond what just a buyer is willing to pay during a bidding war. They want to protect buyers from overpaying, Joan Trice, president of the Collateral Risk Network, told The Journal. The Collateral Risk is an organization for both appraisers and lenders.

“In a frenzied market, it is harder to nail down what value is,” Jonathan Miller, chief executive of Miller Samuel Inc., an appraisal firm, told The Wall Street Journal. “Just because the appraiser doesn’t agree with the purchase price, whatever the reason, doesn’t mean they’re wrong.”

Some buyers are waiving appraisals to make their offer in a bidding war stand out even more to a home seller. But that is lessening somewhat: Twenty-five percent of buyers waived their appraisal contingency clause in August, down slightly from 27% in July.

[#item_author] Feedzy

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