A recent article in the Wall Street Journal (reposted on Realtor.com) says soaring home prices are “roiling appraisals and upending sales.” They report that more & more properties are being valued below their agreed-upon sales price, causing some deals to collapse. The reason is because home buyers are frequently paying above asking price in bidding wars, and the subsequent appraisals not keeping up with the rapid sales price increases. According to CoreLogic, around 13% of appraisals came in below the contract price in August. CoreLogic says January’s figure of 7.4% was more typical for the housing market.
“I don’t remember any time where the frequency of buyers being willing to pay so much more than the market data was this high,” said Shawn Telford, chief appraiser at CoreLogic.
“Appraisers say they employ a rigorous approach to valuing a home that over time is more accurate than simply reflecting what a buyer offered during a bidding war. An unbiased appraisal can protect a buyer from overpaying for a property, said Joan Trice, president of the Collateral Risk Network, an organization that includes appraisers and lenders.”