22 Offers But No Guarantee on Appraisal
July 25, 2017
After Dallas-area real estate pro Laura Barnett put a listing on the market three weeks ago, it quickly received 22 offers. But Barnett didn’t take the highest bid.
From NAR’s blog: The Future of Appraisals Is Not Simple
Instead, she took the cash offer because she wanted to ensure that there were no hang-ups along the way toward closing, she told CNBC. Appraisals, she says, are not keeping up with the sales prices. If the appraisal doesn’t match the contracted price, buyers usually can’t get the mortgage and then never make it to settlement.
“They’re kind of putting a glass ceiling where we can’t raise our prices any higher than we have comps to support it, so we’re definitely going with more cash offers than we used to,” Barnett, a real estate professional with RE/MAX DFW Associates, told CNBC.
Younger, first-time buyers are feeling the brunt of the competition. They tend to be more mortgage-dependent and many also use low down-payment loans, which tend to have stricter underwriting standards. When appraisals come in even the slightest bit under the contract price, the mortgage financing can fall through.
“Anytime prices move up fast, the actual appraisal process, because they’re looking back in history, not forward into the future, they are lagging behind,” Lawrence Yun, chief economist at NAR, told CNBC. “From the buyer’s perspective, it’s a tough situation where they want to rely on the value of the home, on the appraisal, yet they know that if they decide to back away there are other buyers waiting to pounce.”
Source: “This House Had 22 Offers. Here’s Why the Owners Didn’t Take the Highest,” CNBC (July 24, 2017)
Updated: May 21, 2019