Home prices continue to climb and are projected to increase by about 5% over the next twelve months. That is great news for anyone who owns a home. However, it could present a challenge for a family trying to sell their house.
Some buyers can get excited, over zealous or even desperate with the multiple offer situations that happen with almost every home for sale.
The danger of over bidding is when the home is already priced at market value, it may not appraise for the price you’ve offered to pay. This poses a problem when financing a home. Lenders use appraisers to ensure that the home is a viable investment for the bank holding the mortgage. Appraisals are not for the buyer or seller.
When prices are surging like they are right now, it is difficult for appraisers to find adequate, comparable sales (similar houses in the neighborhood that closed recently) to defend the sales price when performing the appraisal for the bank.
Appraisers in the Denver Metro area are aware of the low inventory / escalating price problem buyers and sellers face. In Colorado, 99% of homes do end up selling for list price. This is a good sign that appraisals are in line with the market.
However, The National Association of Realtors (NAR) recently released information revealing just how prominent the challenge is in today’s market can be on a national scale.
And the challenge is deepening…
Every month, Quicken Loans measures the disparity between what a homeowner believes their house is worth as compared to an appraiser’s evaluation in their Home Price Perception Index (HPPI). Here is a chart showing that difference for each of the last 12 months.
As we can see the difference has increased each of the last two months.
Here’s how we can help
Every house on the market has to be sold twice; once to a prospective buyer and then to the bank (through the bank’s appraisal). With escalating prices, the second sale might be even more difficult than the first. We willingly work with appraisers to answer questions and assist in any way that is acceptable to help ensure the home your buying is appraised appropriately.
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