Many buyers are offering more than the asking price on properties undergoing bidding wars – but when the appraisal finds the true market value of the home, they may find that they’ve agreed to pay too much.
Home sales commonly fall through when a property appraises for less than the price the buyer offers. The seller may be unwilling to accept a lower offer, and the buyer may then decide the deal isn’t worth it.
Appraisal issues are still one of the most common causes of delayed settlements, according to March data from the Realtors® Confidence Index. Real estate professionals reported that appraisal issues delayed 19 percent of closings in March – the second most reported problem behind “issues related to obtaining financing.” Bankrate.com recently offered some tips for protecting transactions from low appraisals.
Buyers should ask their lender to find an appraiser who works regularly in the county where they’re purchasing. Appraisers who know the area are less likely to evaluate properties based on flawed data. Buyer’s agents should also be present during an appraisal appointment in order to provide the appraiser appropriate comps and explain any information that could be skewing the comps.
In some cases, sellers are being preemptive – getting an appraisal before listing their home and using that appraisal to set a realistic list price. If they’ve done this, they’ll should give a copy of their prelisting appraisal to the buyer’s appraiser.
Clients can also contest a too-low appraisal. The appraiser or a supervisor may agree to consider any new or overlooked information when an appraisal has been questioned.