Based on National Association of Realtors’ Realtors Confidence Index, 54% of homes in the market are getting offers over its listing price! With the current low inventory and high demand real estate market, buyers are flocking over the available inventory which results to a bidding war. Shawn Telford, Chief Appraiser at CoreLogic, elaborates:
“The frequency of buyers being willing to pay more than the market data supports is increasing.”
While this is perfect for today’s sellers, you may find some difficulties in navigating if the price of your contract doesn’t match up with the house’s appraisal value. This is called an appraisal gap. This is happening more today due to the current real estate market state.
According to recent data from CoreLogic, 19% of homes had their appraised value come in below the contract price in April of this year. That’s more than double the percentage in each of the two previous Aprils. The chart below uses the latest insights from NAR’s Realtors Confidence Index to showcase how often an issue with an appraisal slowed or stalled the momentum of a house sale in May of this year compared to May of last year.
In case the appraisal comes in below the contract price, there’s a chance that the buyer’s lender won’t loan them more than the house’s appraised value. That means there will be a gap between the amount of loan the buyer can secure and the agreed contract price on the house. When this happens, both the buyer and seller share the same interest in making sure the sales moves forward with no delay. The seller will wants to make sure that the deal closes, and the buyer won’t want to risk losing the home they wanted. That’s why it’s common to ask for sellers to ask the buyer to cover the difference themselves in today’s competitive market.
Whether you’re buying or selling, it is best to have a trusted real estate professional by your side to deal with unexpected events like appraisal gaps. Connect with us and we’ll make sure that you’ll have a smooth real estate experience!