Soaring Home Prices Are Roiling Appraisals and Upending Sales
More properties are being valued below their agreed-upon sales prices, causing deals to collapse
About 13% of appraisals of homes came in below the contract price in August, according to housing-data provider CoreLogic.
PHOTO: BRANDON BELL/GETTY IMAGES
By Nicole Friedman
https://twitter.com/nicolefriedman
nicole.friedman@wsj.com
Oct. 10, 2021 5:33 am ET
Jason and Talitha Brooks listed their house in Orange Park, Fla., in June at $320,000. After receiving multiple bids, the couple accepted an offer at $335,000. But the appraiser, hired by the buyer’s lender, valued the home at only $305,000. The Brookses and the buyer couldn’t agree on a new purchase price, and the deal fell through.
“This whole appraisal process, it’s just so subjective,” Mr. Brooks said.
An unusually high number of homes across the country are being appraised below their agreed-upon sales prices, causing a number of deals to collapse.
Home prices have soared in recent months. (1) Buyers are frequently paying above asking price to win bidding wars, and appraisals haven’t always kept up with those rapid price increases. About 13% of appraisals came in below the contract price in August, according to housing-data provider CoreLogic. That was down from a recent high of 19.7% in May but above 7.3% in January 2020, a rate CoreLogic said is more typical for the housing market.
“I don’t remember any time where the frequency of buyers being willing to pay so much more than the market data was this high,” said Shawn Telford, chief appraiser at CoreLogic.
The gulf between contract prices and appraised values highlights the risks to buyers in the current market, especially those stretching their budgets to win a bidding war. Mortgage lenders will typically lend only enough to cover the appraised value of a home. So when an appraisal comes in below the contract price, the buyer has to make up the difference, renegotiate the price or let the deal fall through.
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