Here’s my advice for handling issues that pop up with appraisal gaps.
We all know that when supply is low and demand is high, prices are naturally going to rise. This is definitely the case in our real estate market right now. Therefore, appraisals have been coming in below the contract price at a higher rate. This is called an appraisal gap, and is a natural result of market conditions like this.
Appraisers justify home prices based on past sales. Their job is to remain an unbiased third party and make sure the lender isn’t loaning more than the home is worth.
Keeping Current Matters and CoreLogic just released a study on appraisal gaps that you can see at 1:45 in the video above. It shows that they’ve been steadily increasing since May 2020. Back then, just 7% of transactions were seeing appraisal gaps. In May of this year, that jumped all the way up to 20%. That’s one in five transactions across the country!
What should you do if you come across an appraisal gap? The best thing you can do is know your options. We are still in a seller’s market, so we commonly see sellers come back to the buyer and ask them to pay the difference. There are other options, which is why it’s important to go over them with your trusted real estate agent.
If you have any questions for us about appraisal gaps or anything else related to real estate, don’t hesitate to reach out via phone or email. We look forward to hearing from you soon.