Home Sales are falling apart as appraisals are under the agreed price
|20% of home sales are above the appraised value. Deals are falling though.
Upended Sales
The Wall Street Journal reports Soaring Home Prices Are Roiling Appraisals and Upending Sales
“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,” said Shawn Telford, chief appraiser at CoreLogic.
Jason and Talitha Brooks listed their house in Orange Park, Fla., in June at $320,000. After receiving multiple bids, the couple accepted an offer at $335,000. But the appraiser, hired by the buyer’s lender, valued the home at only $305,000. The Brookses and the buyer couldn’t agree on a new purchase price, and the deal fell through. “This whole appraisal process, it’s just so subjective,” Mr. Brooks said.
An unusually high number of homes across the country are being appraised below their agreed-upon sales prices, causing a number of deals to collapse.
Mortgage lenders will typically lend only enough to cover the appraised value of a home. So when an appraisal comes in below the contract price, the buyer has to make up the difference, renegotiate the price or let the deal fall through.
Many buyers are plunking down payments of just 5% to 10% because they need extra cash available in case the house is appraised below the sales price, said Nicole Dudley, a real-estate agent in the Phoenix area.
A survey by the National Association of Realtors showed that 12% of contracts that were closed or terminated faced appraisal issues that month, up from 9% in August 2019, before the Covid-19 pandemic sparked a housing boom.
Appraisal Gap
20% of sales are above the appraised value. That figure is from the July Corelogic article Appraisal Gap Increases in “Hot” Markets
Many buyers just don't care, especially all cash buyers.
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