The spirit of Thinventory remains strong in many areas of the southeastern Wisconsin real estate market. Smart Sellers are getting their homes "all dressed up and ready to sell" . The lack of inventory has Buyers standing in line and minimizing contingencies..as discussed in an earlier post..to read it click here...we see inspections disregarded...hugely "attractive" earnest money deposits...flexible closing dates. Whatever combination of incentives seem most attractive to a Seller are employed by anxious Buyers.
Time was ...not sooo long ago and far away that Agents told Buyers that Appraisals were the "lifeline to reality"....their lender would not allow them to OVERpay for a home. This third party objective source would verify that current homes sold were evidence of the value of the subject property that they were purchasing. IF the home "didn't appraise" smart Sellers would renegotiate the price and lower it to match the appraisal. There was a fear that the home would again at this "objective price"...or Worse...would appraise for less.
As agents know...or should...and many consumers do not...the appraiser is given the offer to purchase when given the appraisal assignment. Some people liken this to an "open book test"...the answer is in plain sight and supporting data just has to be "made to conform" to the answer and magically regardless of the amount the Buyer paid over the asking price...and some people might say...over the market price...BINGO...the property appraises for exactly the price the Buyer has agreed to pay.
Let's look at one more aspect of the offer...the amount of money that a Buyer has as a down payment...which translates to the amount of risk that a lender may or may not have should unforeseen circumstances cause the Buyer to default on the loan. From our experience...the less the risk the greater the liklihood that no matter what the price is the Buyer has written ...the property will appraise for the amount of the offer. If the Buyer has chosen a 5 to10...or anything less than 20% down payment ...then there may well be a difference between the appraisal and the purchase price and the olden days of renegotiation of the price may again surface.
We won't say that the appraisal is a safety net...we have not said that for a few years....because....we have seen it vanish proportionately with the amount of the down payment a Buyer has,,,their "financial worth" seems to sway what was once believed to be objectivity.
Buyer Beware takes on a new meaning...emotions sometimes override logic in determining the amount of an offer...and we believe...when the financial stars align...subsequently guide the appraisal.realestateappraisals#appraisalobjectivityvanished
This has been a real estate opinion post brought to you by Sally K. & David L. Hanson,Broker Associates with EXP Realty, LLC, honored to be of service for all things real estate in southeastern Wisconsin.