Bank Appraisal in the Housing Market

Bank Appraisal in Today’s Housing Market

When supply is very low and demand is very high, home values are increasing rapidly. Experts estimate that home values will appreciate by another 5% over the next twelve months. Bank appraisal, therefore, is the major challenge in such a market.

With prices surging, appraisers find it difficult to find adequate or comparable sales. Or, sales for similar houses in the neighborhood that recently closed. Thus, it is also difficult to defend the selling price when performing the appraisal for the bank.

Home Price Perception Index:

Every month, Quicken Loans measures the disparity between what a homeowner seeking to refinance their home versus what their house is worth. This is compared to an appraiser’s evaluation of that same home.

Bill Banfield, VP of Capital Markets at Quicken Loans urges anyone looking to buy or sell in today’s market to remember:

“A 1 or 2 percent difference in home value opinions may not seem like a lot, it could be enough to derail a mortgage. A homeowner, or a buyer, could be forced to bring more cash to a closing. This is done in order to make a mortgage work if the appraisal is lower than expected. But, if an appraisal comes in higher, they would be surprised with more equity than they had planned. Either way, if owners are aware of their local markets it will lead to smoother mortgage transactions.”

The chart below illustrates the changes in home price estimates over the last 12 months.

Bottom Line

Every house on the market has to be sold twice; once to a prospective buyer and then to the bank. Which, would be through the bank’s appraisal. With escalating prices, the second sale might be even more difficult than the first. Planning on entering the housing market this year? Let’s get together to discuss this and any other obstacle that may arise.

 

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