We’ve noticed the sudden increase in home prices lately, and it seems like everyone else has too. So why does it seem like appraisers are missing the boat?
Lately, there has been an unusual spike in the number of appraisals that have come in low, and we understand this can cause a lot of frustration for home buyers trying to secure a loan. So we’ll go ahead and explain two things. First, why home values are increasing, and two, why appraisers aren’t following suite.
Home values have been going up for several reasons, but there is one reason in particular that we have addressed before – the basic economic principle of supply and demand. We have a low amount of homes for sale, and a lot of eager home buyers ready to purchase. As the demand for homes increases, and supply decreases, we see prices go up.
So why don’t appraisers use supply and demand to adjust home values? Fairly recently, certain regulations have been put in place to prevent small housing bubbles from developing and bursting.
Appraisers previously could make adjustments to an appraised home based on the most current market values, but now the home values are largely determined by the previous six months of home sales in the area. This effectively slows down the price spikes, allowing the market to adjust more slowly.
So for now, it appears that appraisals will continue to come in low. There are steps you can take to help prepare for an appraisal that comes in low. We highly recommend calling your lender or real estate agent to find out what you can do to mitigate problems that may surface from an appraisal.
Creekside Mortgage, Inc has an expert team that can answer your questions about appraisals and home ownership. Give us a call today at 800.920.5420.