In today’s real estate market, low inventory and high demand are the driving factors behind increasing home prices. Right now, 54% of homes are receiving offers over the listing price, based on the latest Realtors Confidence Index from the National Association of Realtors. The frequency of buyers being willing to pay more than the market data supports is also increasing.
While this is fantastic news for sellers, it can be difficult to navigate if the price of your contract doesn’t match the appraisal price. This is called an appraisal gap, and it’s happening more often than ever in today’s seller’s market.
According to recent data, 19% of homes had their appraised value come in below the contract price in April of 20121. That’s more than double the percentage in each of the two previous Aprils.
If an appraisal comes in below the contract price, the buyer’s lender won’t loan them more than the house’s appraised value. That results in a gap between the amount of loan the buyer can obtain and the contract price on the house. In this situation, the seller will want to make sure the deal closes, and the buyer won’t want to risk losing the home. That’s why it’s common for sellers to ask the buyer to make up the difference themselves in today’s competitive market.
Whether you’re buying or selling, let’s chat to help you navigate appraisal gaps in the current market.