The Appraiser Strikes Again
July 20th, 2009 categories: Buyer Resource, Seller Resource
I am in the middle of a Real Estate deal here in Rohnert Park where the purchase price on the contract is higher than the appraised amount. The market is relatively hot in some pockets, with many investors, first time home buyers, etc, there is a lot of competition.
"Sorry, your home is worth this much"
This particular buyer had put in offers that were above asking in the recent past and we had been rejected each time. We decided to go a little higher, and finally got an acceptance.
The inspection went reasonably well…great news. What else is left? Oh yeah…the appraisal…should be no problem right?
When the appraisal came in, it came in LOW. How can this be…isn’t contract price the market value? It is…but market value can be different from appraised value. Once again, we were reminded that even though you are in contract, it is never a done deal. We are currently working through a counter offer scenario where everyone can be happy and the transaction can take place.
Appraisers and lenders seem to be overly cautious these days…do they realize we just saw a 40-50% price reduction in home values?
Lenders will only lend on the lesser of appraised value or contract price. So…if a property appraises for $250,000 and is under contract for $260,000, the lender will only lend $250,000…the balance will need to come in the form of cash.
Home Prices can still fall from these levels…but they can also go up. I am not a statistician, but with the activity we are seeing now, I have to believe the prices are stable at this point, and will be more likely to rise due to demand than fall due to lack of demand or oversupply.
