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Home appraisals can’t keep up with rising prices

Appraisals cannot keep up with rising home prices as many properties continue to sell above list price — and potential homebuyers’ deals are falling through because of it.

FOX Business’ Grady Trimble spoke with Kathy Menighan Wilson, a Chicago-based senior broker associate, about what buyers and sellers can do to maintain a foothold in the market.

“In terms of being a buyer, you really have to come in prepared,” Wilson said during an appearance on “Varney & Co.” “And when I say prepared that means you’re already pre-approved, but you have to know what dollar amount you’re willing to pay for a house.”

FEWER HOMES FOR SALE AS LISTINGS DROP

Wilson adds that buyers need to have an idea of at what price on a house they are willing to walk away, and if they are going to chase after a home they need to know what they can put down to make it work, given that an appraisal may be under the contract price, thus leaving the buyer to foot the difference. 

The only other alternative, Wilson says, is to get the sellers to come down in price. She asserts that this will not happen in the current market climate, given the increased demand for homes and low inventory.

For sellers, Wilson says she is actually appraising homes before listing them. She notes that she has done this in the past, but not to the same degree or as often as she does now. 

“I get a number. I know I’m confident about that number. I’ll usually go up a little bit knowing that there’s going to be multiple offers—but that’s my credibility. That’s going to give me that ammunition.”

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About 13% of appraisals came in below the contract prices in August, almost double the typical rate before the coronavirus pandemic, according to CoreLogic.

Meanwhile, Goldman Sachs estimates these home prices will climb another 16% by the end of 2022, after already growing 20% year-over-year.

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