December 17, 2021

Realtor Matt Huneycutt talks about how home appraisals work and how they can effect the home buying process.

Introduction

More first-time home-buyers are losing out on homes than ever before. One of the major reasons, appraisals. I'm Matt Honeycutt and we are in challenging times. The market is surging like never before and no one wants to get left behind, but appraisals are holding us back. That makes sense when you think about how appraisals work. Appraisals are defensive in nature. They're ordered by the banks and they look backwards in time, six months to a year. They serve as a minimum value that banks can depend on when they write a loan, but market value is present tense. It describes what buyers are willing to pay for a home today.

Appraisals

The faster a market is rising, the bigger that gap will be. This matters to sellers because they want to sell a home for top dollar, market value. Banks only want to loan for appraised value. There's a disparity there. There's a gap. What we are advising our clients to do is, when we submit our offers, to make a pledge to the sellers that if the offer price is higher than what it appraises for, we as buyers will make up the difference as a cash down payment so that banks do not get overextended, sellers get exactly what they bargained for, and we as buyers get the home that we love at the end of the day. We've had tremendous success this year getting offers accepted with these appraisal bridges. And in many cases, we didn't even need to bridge the appraisal at all. It was simply giving the sellers confidence that we could if we needed to that got our offers accepted. If the appraisal does come in low, the benefit to the buyer is that their monthly mortgage payment will be reduced by the cash that we put in to the purchase. So at the end of the day, you're really not paying any more for a house than what you bargained for in the first place. You're just restructuring the deal.

In Closing

When it comes to making these promises with appraisal bridges, every deal is different. So we need to structure it according to the situation. To learn more about how this works or to jump into a scenario for yourself, reach out today. I'm Matt Honeycutt with the Whissel Realty Group.

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