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Appraisals Are Challenging in an Appreciating Market


For Agents’ Eyes Only…

Each Thursday we will be posting a blog to help real estate professionals understand how they can better assist their buyers and sellers navigate the current real estate market. Hope you find the information helpful. – The KCM Crew

The real estate market is recovering with prices in most regions of the country showing assorted levels of appreciation. In a market where prices are escalating, the appraiser may find it difficult to find appropriate 'comps' for your listing. That can cause challenges during your real estate transactions as appraised values may not reflect market conditions such as rising prices, multiple bids, and low inventory.

In a recent survey conducted  by the National Association of Realtors (NAR), it was revealed that:

  • 11% of Realtors said a contract was cancelled because an appraised value came in below the price negotiated between the buyer and seller
  • 9% reported a contract was delayed
  • 15% said a contract was renegotiated to a lower sales price as a result of a low valuation

Discuss this situation with both buyers and sellers right from the beginning. By managing expectations early, it will enable you to better handle the challenge should it arise.

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2 Responses to “Appraisals Are Challenging in an Appreciating Market”

  1. Ken Montville October 18, 2012 at 9:05 pm # Reply

    This is great advice…but even if you hammer home the fact that the appraisal may not come in at the contract price, the sellers are still shocked and confused. Most sellers think that if someone agrees to buy their house at a certain price then that’s the price.

    Even knowing that a mortgage company must agree to the price (through the appraisal) doesn’t seem to comfort the sellers.

    This problem is compounded in areas where there may not have been a lot of recent sales activity, let alone sales activity that can be used as comps.

    I have found that it’s really the individual appraiser who calls the shots. If they’re in a good mood, you’ll get a good appraisal. If not…

  2. Ines January 5, 2013 at 6:44 pm # Reply

    Disagree that ” appraiser may find it difficult to find appropriate ‘comps’ for your listing.” Most of the time its the agent that has difficulty finding appropriate ‘comps’ for the listing. They listen to their client and list it way above list price.

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