You have heard a lot about supply being low, which in turn makes the demand very high. Home values are increasing rapidly, and experts are projecting that home values could appreciate by another 4% or more over the next year. A challenge in such a market is the bank appraisal.
When prices are rising, it is difficult for appraisers to find adequate, and comparable houses in the neighborhood, to defend the selling price when performing the appraisal for the bank. It is important for homeowners to note as even a .5% difference in appraisal can mean thousands of dollars that a buyer or seller would have to come up with at closing, depending on the price of the home.
Appraisers and real estate professionals assess their local housing markets daily. However, homeowner’s may only think about their housing market when they see “for sale” signs hit front yards in the spring or when they think about regaining their equity. Many consumers use the tax season at the beginning of the year to reassess their entire financial life. It also provides an opportunity for them to consider how best to take advantage of their equity while mortgage interest rates are still low.
The bottom line here is every house on the market must be sold twice – once to a potential buyer and then to the bank, through the banks appraisal. With ever-increasing prices, the second sale might be more difficult than the first. If you are planning on entering the housing market this year, meet with a skilled real estate professional who can direct you through this and any other obstacles that may arise.