Are Home Appraisals Keeping Up With The Rising Market?
Home Appraisals Catching Up To The Rising Real Estate Market
One of the most difficult and unpredictable times in a home purchase and sale is the home appraisal.
Up until that point one side of the transaction is in control, whether buyer or seller.
But the home appraisal is different, a bad home appraisal can damage a good deal beyond any reconciliation.
Once the appraiser determines the value of a home and submits the home’s appraisal report it can be very difficult to dispute that value.
That’s why this week’s news pertaining to the continued rise in the value of homes is certain to make many homeowners very very happy. However, with the good news there always seems to be some level of bad news right behind it. The unintended consequences so to speak.
The mortgage loan industry appears to be a group of folks just so affected by rising home values. Specifically, when it comes down to the home appraisal. Broward County home appraisals appear to move to the front of the line when mortgage lenders are preparing their offers for mortgage. Mariam-Webster’s Dictionary defines an appraisal as “a valuation of property by the estimate of an authorized person.” In mortgage terms the appraiser gives an independent, third party assessment of the subject property. Lenders rely on an accurate home appraisal as a backstop to the loan. The value they are lending on must be recoverable should the borrower fail to repay the borrowed amount in full.
Which is why the steady rise in home values is having a less than desirable consequence on home appraisals. So long as a steady inventory of homes are selling in the recent weeks and months this not an issue at all. Considering the fact that home appraisals are dependent upon comparable sales to determine property values, this could become an issue. Especially if inventory and sales dry up, and there are less comparable sales to work with. This will cause the appraiser to look further back into the past for comparable sales. With a rising market that can cause some problems. One being, older sales won’t reflect recent price gains.
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In a seller’s market this it is not unheard of. In fact, right here in Coral Springs we are experiencing lower than usual inventory on the market. Homes for sale just can’t keep up with current demand.
One likely outcome in this scenario could be that the price that the buyer and seller agreed upon will end up being higher than the value the appraiser believes, based on comparable sales. The smallest difference in value could be just enough to quell the mortgage.
Now don’t get me wrong, lenders are in the business of lending money. Which means they like to lend money and they’re especially happy when these deals work out. So rest assured they are certainly aware of this phenomenon and are keeping track. One such company is Quicken Loans. Their HPPI (Home Price Perception Index) measures the disparity between what a refinancing homeowner is seeking, as compared to the value the appraiser comes up with.
The best news (or at least on a national level) is that the gap between homeowners, home buyers and appraisers is closing. As we know real estate is hyper local, but this trend appears fairly widespread nationwide. By mid-November 2017, the difference reduced for the 5th consecutive month. As of this writing the difference is within 1%.That’s great news for everyone.
Coral Springs and Parkland appraisals and mortgages are very important components to the home buying experience, but it doesn’t end there. Our job at Miranda Executive Realty is to guide buyers and sellers, and to fit all of the pieces of a real estate transaction together and ensure a smooth transaction along the way. Home appraisal and all. So call us to see how we can help your next real estate transaction be the best one yet.
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