In todayโs real estate market, low inventory and high demand are driving up home prices. As many as 54% of homes are getting offers over the listing price, based on the latest Realtors Confidence Index from the National Association of Realtors (NAR). Shawn Telford, Chief Appraiser at CoreLogic, elaborates:
โThe frequency of buyers being willing to pay more than the market data supports is increasing.โ
While this is great news for todayโs sellers, it can be tricky to navigate if the price of your contract doesnโt match up with the appraisal for the house. Itโs called an appraisal gap, and itโs happening more in todayโs market than the norm.
According to recent data from CoreLogic, 19% of homes had their appraised value come in below the contract price in April of this year. Thatโs more than double the percentage in each of the two previous Aprils.
The chart below uses the latest insights from NARโs Realtors Confidence Index to showcase how often an issue with an appraisal slowed or stalled the momentum of a house sale in May of this year compared to May of last year.
If an appraisal comes in below the contract price, the buyerโs lender wonโt loan them more than the houseโs appraised value. That means thereโs going to be a gap between the amount of loan the buyer can secure and the contract price on the house.
In this situation, both the buyer and seller have a vested interest in making sure the sale moves forward with little to no delay. The seller will want to make sure the deal closes, and the buyer wonโt want to risk losing the home. Thatโs why itโs common for sellers to ask the buyer to make up the difference themselves in todayโs competitive market.
Bottom Line
Whether youโre buying or selling, letโs connect so you have an ally throughout the process to help you navigate the unexpected, including appraisal gaps.
Content previously posted on Keeping Current Matters
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