What role does an appraisal play in the home buying journey? If you’re buying a house with a loan, then your lender is going to order an appraisal. And what they’re looking for there is not to see whether or not you got a great deal or even if you are overpaying for the house. They’re looking to see if they can resell the house and cover the amount of the loan that they’re giving you should you for some reason default. Once you are under contract, the bank hires an independent appraisal company and they objectively look at the criteria of the house and they give a number based on many factors. That number is used by the bank to say, “Are we going to be able to cover this loan by reselling this house should this person not continue to pay us?”
It’s not about whether or not it’s well over or under or whatever. So typically we see appraisals come in “at value” a lot of times. Sometimes we do see them coming in a little bit low. And when they come in low, that means that the buyer, you in this case, needs to actually bring extra money to the table or negotiate back with the seller to get them to lower the purchase price. In this competitive market, what we’re seeing is generally buyers are agreeable to bring more to the table. This is not changing the purchase price of the home but rather just how much of a down payment is going to be required for the buyer. Those appraisal shortages tend to happen more in the spring market here where our prices tend to appreciate while winter comparables support lower values in many cases.