When your seller receives multiple bids on their property, the highest offer shouldn’t always be their default choice. If it comes with an appraisal contingency—and the appraised value doesn’t match the sale price—your seller could be back at square one, looking for another buyer.
With King County home prices surging nearly $100,000 just this year to a record $599,000 in June—home prices in many markets are escalating so quickly that appraisals can’t keep up. That’s why real estate professionals may need to have more conversations with their sellers about appraisals.
“Any time prices move up fast, the actual appraisal process can lag behind because [appraisers] are looking back in history, not forward into the future” to determine appraised value, NAR chief economist Lawrence Yun told the Visalia Times-Delta in Visalia, Calif. “From the buyer’s perspective, it’s a tough situation where they want to rely on the value of the home—on the appraisal—yet they know that if they decide to back away, there are other buyers waiting to pounce.”
Appraisers have been cautious about run-ups in home prices since the last housing crash. And because first-time buyers rely more heavily on low down payment mortgages, which have stricter appraisal requirements, that could put their financing in jeopardy. That’s one reason cash buyers tend to push first-time buyers out of the market, Yun says. Cash buyers rarely need an appraisal to complete the sale.
“The limited number of listings in several markets means that many available homes are receiving multiple offers and going under contract rather quickly,” says NAR President Tom Salomone. That's putting the squeeze on buyers.
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