{"id":23587,"date":"2021-04-30T08:45:55","date_gmt":"2021-04-30T15:45:55","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=23587"},"modified":"2021-05-03T08:50:01","modified_gmt":"2021-05-03T15:50:01","slug":"buyer-appraisals-in-a-hot-market","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/buyer-appraisals-in-a-hot-market\/","title":{"rendered":"A Homebuyer\u2019s Guide to Real Estate Appraisals in a Hot Market"},"content":{"rendered":"

\u201cReal estate values across the country have been rising rapidly in the last several years,\u201d says Rick Fuller<\/a>, a San Francisco<\/a>-based top agent with nearly two decades of experience.<\/p>\n

While this is generally a good thing \u2014 especially if you\u2019re a homeowner! \u2014 a market that is almost too<\/i> hot can be troublesome for hopeful buyers. Due at least in part to the coronavirus pandemic, 2020 was an explosive year<\/a> for real estate, with multiple-offer scenarios<\/a> commonplace from coast to coast. This type of market causes home values to escalate quickly, faster than appraisers can keep up with.<\/p>\n

The list price of a home is usually established based on recent sales of comparable homes (comps<\/a>) within the area. Although \u201crecent\u201d can be subject to interpretation, industry standards tend to consider this to mean sales that transpired within the last six months. But here\u2019s the thing: When home prices are rising fast, comps that are six or even three months old might be too outdated.<\/p>\n

\u201cIn a competitive market, oftentimes the buyer will make an offer above the list price,\u201d says Fuller. \u201cWhen the seller accepts, that offer may be higher than anything else has sold for in their community.\u201d<\/p>\n

So if the seller is earning a nice price, and the buyer is willing to pay, what\u2019s the problem?<\/p>\n

Well, according to a 2020 trends report put out by the National Association of Realtors\u00ae, 86% of homebuyers are financing their purchase<\/a>. This means that an independent appraiser has to step in and assess the value<\/a> of the home in order for a lender to agree to provide the commensurate mortgage. If the offer on a house is above and beyond the recent local norms, the appraisal may come in low, and lenders aren\u2019t going to loan a buyer more<\/i> money than a house is actually worth. So if an appraisal comes in lower than the offer price, it can put the deal in jeopardy.<\/p>\n

Fortunately, Fuller has lots of expert advice and has shared four ways to navigate appraisals in a hot market and avoid purchase delays \u2014 or worse, becoming part of the 13% of transactions<\/a> that fall apart due to appraisal issues.<\/p>\n

\"An<\/a>
Source: (Ralph (Ravi) Kayden \/ Unsplash)<\/figcaption><\/figure>\n

1. Stay ahead of the game<\/h2>\n

When it comes to avoiding valuation mishaps, prevention is key. Especially in a fast-paced market, you simply won\u2019t have the time to wait and prepare an argument after<\/i> receiving a low appraisal report \u2014 you\u2019ll want to mitigate the odds of that happening right from the start.<\/p>\n

\u201cThe No. 1 way to minimize the chance of an appraisal coming in low is to provide the best comparable sales<\/a> and active listings in the community to the appraiser,\u201d says Fuller.<\/p>\n

\u201cAppraisers appraise a wide variety of properties in a wide variety of communities; they don\u2019t always know what\u2019s happening on your street.\u201d<\/p><\/blockquote>\n

An experienced agent<\/a>, however, will know the market inside and out and will be well-prepared to advise you when a home runs the risk of appraising lower than its true market value<\/a>; together, you can prepare a game plan prior to the appraisal. Your agent can track down comparable properties that are active, pending sale, or have recently sold at prices that will help to justify your seemingly generous offer better than months-old comparable sales.<\/p>\n

Fuller cautions that some of these properties may have sold outside of the multiple listing service<\/a> (MLS) and will have to be discovered through title companies. Homes that sold before they ever went to market and for-sale-by-owner<\/a> properties are two common examples where sales prices may help your case, but the information won\u2019t be as easily discoverable as with homes that have sold conventionally. An agent can be instrumental in helping you discover these deals.<\/p>\n

2. Showcase those assets<\/h2>\n

Chances are, the things that attracted you to a home are also hot-ticket items for other buyers. There can be dozens of 2,000-square-foot houses with a garage and a fenced-in backyard in the neighborhood, so what makes this<\/i> particular home stand out?<\/p>\n

\u201cVery beneficial in mitigating a low appraisal issue is providing the appraiser with a list of amenities and improvements that this property has,\u201d suggests Fuller.<\/p>\n

The key to this exercise is detail. Rather than simply noting that the home has a renovated kitchen<\/a>, specify exactly when the project was completed, the age and brands of the appliances, the flooring and countertop materials, and so on.<\/p>\n

\u201cI want to see when those products were installed, and I want to see the amount of money the homeowner paid for those amenities to be installed,\u201d says Fuller, who encourages offering as much information as possible.<\/p>\n

\u201cAn appraiser can use this list to help accurately assess the home and give a premium to the appraisal because of amenities that neighboring properties may not have.\u201d<\/p>\n

When putting together this list of home assets, consider elements such as:<\/p>\n