Boston condo for sale fact: The appraisal report in a home purchase can make or break a sale.
All lenders will require that a licensed appraiser determine the property value. The appraiser—-who works independently and is not on staff at the bank—-studies recent comparable sales in the neighborhood and makes adjustments for stuff like number of bedrooms, bathrooms, parking and kitchen/bath finishes.
You’ll ultimately get a report that states the appraiser’s value opinion, which will ideally be what you’re paying. (The appraisal can sometimes end up being more than you’re paying, which is great for you but doesn’t affect the loan.)
If the appraised value is less than the contract price, it’ll be up to you to bring in more money—-or negotiate a price reduction with the seller.
Pro Tip for Boston Condo Buyers: Always ask your lender how long your appraisal contingency should be. Appraisal report and lender review turnarounds can vastly differ, and you don’t want to tie your contractual commitment to a guess.
n today’s housing market, where supply is very low and demand is very high, home values are increasing rapidly. Many experts are projecting that home values could appreciate by another 5% (or more) over the next twelve months. One major challenge in such a market is the bank appraisal.
When prices are surging, it is difficult for appraisers to find adequate, comparable sales (similar houses in the same neighborhood that recently closed) to defend the selling price when performing the appraisal for the bank.
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 house is worth and what an appraiser’s evaluation of that same home is.
March 2015 marked the first month of a three-year gap between what an appraiser and a homeowner believed a home was worth. That gap widened to 2.65% in September 2015 and had consistently hovered between 1.0% and 2.0% through November 2017.
The chart below illustrates the changes in home price estimates over the last three years:
In the latest release, the disparity was the narrowest it has been since March 2015, as the gap between appraisers and homeowners was only -0.33%. This is important for homeowners to note as even a .33% difference in appraisal could equate to thousands of dollars that a buyer or seller has to come up with at closing (depending on the price of the home).
Bill Banfield, Executive VP of Capital Markets at Quicken Loans urges homeowners to find out how their local markets have been impacted by supply and demand:
“The appraisal is one of the most important, although sometimes least predictable, parts of the mortgage process. The Home Price Perception Index is a way to illustrate the differences of opinion, and these differences affect everything from the type of mortgage a borrower can get to the expectations a seller has about the proceeds available upon sale of their home.”
Every house on the market must be sold twice; once to a prospective buyer and then again to the bank (through the bank’s appraisal). With escalating prices, the second sale may be even more difficult than the first. If you are planning on entering the housing market this year, let’s get together to discuss this and any other obstacles that may arise.
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