In recent months we’ve shared with you the news that home prices are on an incline while inventory is declining. yet one effect of the market shift that we haven’t discussed is how price and inventory are impacted by home value.
While the market has been in the ditches in years past, appraisals have often been estimated on the low end to account for the lower prices and the expectation or fear of a further market drop. But lower appraisals greatly affected the loan values buyers were eligible for. For example, if a home was being sold for $300,000 and the buyer was expected to provide 20% down ($60,000), the appraisal would have to come in at $240,000 or higher for the buyer to qualify for their mortgage loan. But too often appraisals were coming in lower, which meant the buyer would either have to come up with more for their down payment, or find a cheaper house. Can you guess which option most buyers were forced to choose?
Recently, with increasing home prices and a shorter supply of inventory to go around, appraisals are beginning to meet or exceed selling prices more frequently, which means that fewer deals are falling apart due to low appraisals. This is just one more factor reflecting a brighter outlook in the recovery of the market!
Have you had an experience with an appraisal affecting the sale or purchase of a home? Share your story with me on Facebook!