Appraisers Starting To Push Back Against Rising Prices

Appraisers Starting To Push Back Against Rising Prices

As anyone who has been watching the market in our area has seen, prices have been rising at unprecedented rates.  Especially in the lower price ranges.  To complicate matters, inventory has been extremely low, builders are not keeping up with demand and the continued low interest rates coupled with the threat of rising interest rates has pushed demand ever higher.  Extremely low vacancy rates for rentals have contributed to the ever increasing demand for housing.

So what is a home worth in a market like this?  Well, unfortunately for buyers in the lower price's worth whatever someone is willing to pay for it.  The trick is proving it. The market is currently outpacing the comparable sales leaving appraisers stuck between a rock and a hard place in terms of proving value.  Ever since the increased regulation that came about as a result of the housing crash of 2008 appraisers are extremely conservative for fear of being audited.  Market velocity is a difficult pricing method and one with which appraisers are chary of using.  

So what's the result?  The result is that you're seeing appraisals start to come in low, and sometimes, drastically lower than the agreed upon purchase price.  

What does this mean to you as a buyer?  As long as you have your appraisal objection deadline in the contract, you can always get out and get your earnest money back if the appraisal doesn't come in at value (obviously if that's how the contract is written, be wary of who you use as your agent and make sure they know what they're doing;) .  The other option is to renegotiate, or in some cases bring more money to the table.  You may want to have this discussion with your agent prior to going under contract if you're bidding substantially over purchase price.  

This market is booming.  My opinion is it will continue to do so given the many factors pushing growth in our area that are unlikely to slow down anytime soon.  Managing the appraisal push back will be the next challenge we face as our dynamic market continues to evolve.

Sarah Rowan Headshot
Phone: 970-397-5774
Dated: July 28th 2015
Views: 1,788
About Sarah: Sarah was a licensed real estate agent for 10 years before transitioning into the mortgage industry ...

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