As any buyer, Realtor, lender, or anybody else in the real estate industry will tell you…appraisals have been a hurdle through the economic downturn and housing correction. Lenders tightened underwriting criteria, while appraisers had few competitive properties to compare and have been extremely conservative. As a result, many offers with agreed upon terms between a buyer and seller were rejected with a low appraisal. However, as the Twin Cities real estate market has turned a corner, higher sales pricing has provided better comps for appraisers and they are more likely today to provide a higher home value in 2013 than in 2012. This is good news for buyers, sellers, and for those looking to refinance.
Home appraisals no longer derailing sales
By Les Christie @CNNMoney May 15, 2013: 9:14 AM ET
Consider this one more sign that the housing market is heating up: Appraisers are putting higher values on homes again, allowing for more deals to go through.
During the housing bust, sales were often derailed by low-ball appraisals that fell far shy of a home’s selling price.For example, if a home cost $500,000 and required a 20% down payment of $100,000, the buyer would need to finance $400,000. But if the appraiser valued the home at $450,000, the buyer would only be eligible for a $360,000 loan — making the home too costly for some buyers.
But now, as home prices climb and housing inventories shrink, appraisers are valuing homes at or above their selling prices, according to Lawrence Yun, chief economist for the National Association of Realtors.
Between 2008 and 2010, appraisals for more than a third of Seattle-based real estate agent Michael Ackerman’s sales came in below the selling price. So he had to get creative.
“I started pulling out the key boxes at the homes so the appraisers couldn’t get in,” said Ackerman. “They had to call me to let them see the home. I would bring a packet of comparables along and explain what I used to price the home.”
But now, with home prices posting such strong gains, those strategies may not be necessary anymore.
“I’ve closed 15 homes so far this year and none of the appraisals have come in below the selling price,” said Ackerman.