Appraisal Issues Back on the Front-Burner
As the saying goes, “April showers bring May flowers.”
In the real estate market this Spring, the equivalent is, “April multiple offers bring . . . May appraisal issues” (OK, so it doesn’t have the same ring to it).
One of the consequences of a home selling in multiple offers is that the winning bidder may easily drive the ultimate price well past what’s supported by the comp’s (“comparable sold properties”). That’s especially the case in neighborhoods where all the recent sales are foreclosures being dumped by their bank-owners.
What happens if the house doesn’t appraise? There are generally 5 possibilities:
One. The Buyer puts up more money.
Two. The Seller reduces their price.
Three. Some combination of #1 and #2.
Four. Neither #1 nor #2, in which case the Buyer’s financing fails, and the deal derails.
Five. Buyer or Seller challenge the appraisal and/or the individual appraiser (and try to get another one).
Until recently, option #2 was a fairly common outcome.
Now, depending on how much equity the Seller has — or doesn’t — that option can be off the table.