by Becky Huebner, Nebraska Home Sales Realtor
I frequently write about challenges in the home buying process. Buyer home inspections are typically being the most challenging part. But a new issue I call “Will It Appraise?” Is rearing its head and thought you might like a heads up.
Problems, real or imagined, are usually found during inspections. Issues are addressed, negotiated and we are on to close, with plenty of time to spare. The appraisal does not usually afford this luxury, as it usually occurs after the home inspection process is completed.
A contract is usually contingent upon a buyer procuring their loan. If the purchase is all cash, then the offer may be contingent on the home ‘appraising for the purchase price. Our “lender letter of approval” gets us most, but not all, of the way there. The loan usually requires an appraisal of the home. The underwriters need this to accept the agreed to value of the home (purchase price) and deem it worthy to lend on at this price. Occasionally the appraiser says the value of the home is less than the purchase price agreed upon.
In the wake of 2008 we knew to be leery of the appraisal. Values were re-adjusting and we were watching to see what the market, and the lenders, were saying. We bumped our way back and today are in a brisk sellers market; emphasis on the word today.
Recently I have seen something I have not seen in a while; some properties appraising for lower than purchase price. I even saw one where the appraiser required an additional repair, not called for by inspector, in order to write the loan. I smell some caution in the wind.
Appraisals can happen anytime prior to close and unlike inspections, agents have no control on when this is done. If it does not appraise, sellers may now have to accept less money than expected, or buyers may have to bring more cash, or both. This could happen just days before close.
Time will tell if this is a meaningful trend or just a blip but thought you might like a “heads-up”.