Appraisals Tanking More Home Sales

by ritasimpson on September 14, 2013

in How's The Market

With bidding wars in hot markets , the property-appraisal process has been undermining transactions, forcing some would-be buyers to walk away.

The impact can be significant. Consider a jumbo borrower required to put 20% down on a $1 million purchase expects to pay $200,000. But if the home appraises at $900,000, the down payment goes up to $280,000—the sum of the $100,000 shortfall plus the $180,000 down payment!

A few forces are at work. First, many homes are being appraised at a lower price than what buyers have offered on a house. That is because home values are improving so fast in competitive, high-priced markets that “comps,” recent sales of nearby homes with comparable characteristics, haven’t kept up.

Another deal breaker is the length of time it takes to get an appraisal, some as many as 20 days. Delays also mean loosing interest rate locks. Another force is the mortgage contingency clause: Sellers in a hot market don’t want to tie their homes with an uncertainty in this climate. So cash buyers are still king! more on this

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