Home Values rising faster than Appraised Values.....Buyers Beware!

This has been a fairly recent development so please consider this: No question that home values are on the rise and that multiple offers are the new reality and that supply is low and demand is high.....BUT  Is the value for these homes really there?

Appraisals take into consideration PAST sales and we are looking closely at PENDING Sales. If they are strong pending sales which allow us to make a time adjustment upward along with very recent sales, then the appraisals may be able to keep up with the apparent perceived value. HOWEVER....Lenders will not allow Pending sales and recent listings to dicate value. There must be recent sales that prove we are in an increasing market. We cannot rely solely on the fact that supply is way down or non existent and that a BUYER is willing to pay whatever for a home because there is nothing else to choose from!

I have had several appraisals involving Sales in the past 2 weeks fall short of sales price by a considerable amount. Trust me, I tried to hard to find some kind of proof in the market that would justify the sale, but there was nothing. If there are no very recent sales and only listings or pending sales that show an increase in values, lenders will not typically ALLOW an across the board TIME adjustment to "catch up with the market" so to speak. Values must be Bracketed, Which means the value for the subject must NOT be HIGHER than all the sales included in the report. This is a RED flag for lenders. 

So before you want to shoot the appraiser. Sellers are raising their prices for a few reasons: Realtors are allowing them to do this and/or Realtors are telling them to do this, due to lack of supply. Then a buyer comes along and BINGO they pay that price. Problem is just because the BUYER is willing to pay the price does not mean the home is worth that price in the market. 

So what I suggest is this: ALL SELLERS and BUYERS should obtain an appraisal before they list and before the buy, this will save alot of deals that fall apart and alot of heartbreak all the way around

We are conduting many pre listing and pre sale appraisals this year. Almost 50% of our business has included this kind of work. It is the smartest MONEY that buyers and sellers will pay to avoid disaster of having deal fall thru or PAYING too much for a home.