Low inventory and rapidly rising home prices in many areas have complicated the appraisal process, causing some buyers and sellers to scramble.
Appraisals have always been an important part of the homebuying process but have often been considered a behind-the-scenes formality. Today, however, appraisals are a front-and-center issue.
A lender orders an appraisal during the mortgage-approval process to confirm that the loan they issue will be sufficiently supported by the underlying collateral, i.e. the home. The appraiser creates a report for the lender that compares the subject property to other recently sold properties – or “comps.”
That’s easy enough when there’s an abundance of sales data, but the low number of ready homes for sale in many areas has resulted in a lack of recent comps. Fierce buyer competition has also driven prices higher, meaning yesterday’s sales often closed at prices significantly lower than today’s prices.
So, whether you’re buying or selling, here are a few things you need to know about appraisals.
