A friend of mine who is a noted home appraiser in the Raleigh-Durham area told me recently that for the first time this year, a home was sold close to the price of his appraisal.
“One sale is not a trend,” he says. But he adds, “At least now, the comparables may reflect the realities of home values in a few short months. I am optimistic.”
Home appraisers rely heavily on sale prices of comparable houses in the neighborhood to determine the appraised value before a sale.
This appraiser’s point mirrors the findings of CoreLogic, a California business intelligence and analytics firm that found that 13 percent of the sold homes in the country had a sale contract above the appraised price in August. That number was about 20 percent in May, but only 7 percent in January 2020.
The gap has forced thousands of potential buyers off the market despite low interest rates because banks and mortgage firms required buyers to cover the difference of the appraised value and agreed-upon sale price before closing. Often, for borrowers, that meant tens of thousands of dollars in extra cash for homes priced between $250,000 and $400,000. The scenario also helped the single-family institutional investors (with unlimited capital) to swoop in and buy homes and offer them as rentals in communities.