Homeowners: Your Home Must Be Sold TWICE!
That’s correct, every home on the market has to be sold 2 times, once to a prospective buyer and then to your bank (through the bank’s appraisal). With home prices increasing, the 2nd sale might be even more difficult than the 1st. Maybe your planning on jumping into the housing market sooner or later… Well, sooner (now) remains a great time to sell and I’m going to tell you why —
In the current residential real estate market, where inventory is very low and demand is very high, property values are rising quickly. Home values can appreciate by another 5%+ over the next year. However, one major challenge a seller might encounter in this seller’s market is the bank appraisal. Why is that?
The answer: If prices are surging, it’s difficult for appraisers to find adequate, comparable sales (similar homes in the neighborhood that have recently sold) to defend the selling price when performing the bank’s appraisal. Every month in their Home Price Perception Index (HPPI), Quicken Loans measures the disparity between what a homeowner who is seeking to refinance their home believes their property is worth, as compared to an appraiser’s evaluation of that same home.
“While a 1 or 2% difference in home value opinions may not seem like a lot, it could be enough to derail a mortgage. A homeowner (or a buyer) could be forced to bring more cash to closing in order to make a mortgage work if the appraisal is lower than expected. On the other hand, if an appraisal comes in higher, they could be surprised with more equity than they had planned. Either way, if owners are aware of their local markets it will lead to smoother mortgage transactions.” (Bill Banfield, VP of Capital Markets at Quicken Loans)
The chart below illustrates the changes in home price estimates over the last 12 months.
Let’s get together soon to discuss this and any other obstacle that might arise!