Potential sellers market brings possibility of lower appraisals – Sun, 29 Mar 2015 PST

Housing market trends bode well for sellers this spring, but some may encounter hurdles even after they land abuyer.

Rising home values and a lack of inventory in many markets could set them up to receive competing offers, but that dynamic could also increase the likelihood that the appraised value of the home could fall short of the agreed upon sale price, potentially scuttling thedeal.

Banks rely on appraisals to determine whether the size of a mortgage being sought by a homebuyer is justified by the market value of the home theyre looking to buy. Lenders do

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Housing market trends bode well for sellers this spring, but some may encounter hurdles even after they land abuyer.

Rising home values and a lack of inventory in many markets could set them up to receive competing offers, but that dynamic could also increase the likelihood that the appraised value of the home could fall short of the agreed upon sale price, potentially scuttling thedeal.

Banks rely on appraisals to determine whether the size of a mortgage being sought by a homebuyer is justified by the market value of the home theyre looking to buy. Lenders do this to ensure that they will be able to recover their funds in the event they have to sell the home should the borrower default on themortgage.

When an appraisal comes in below the agreed upon price, a buyer may not be able to borrow the amount needed to buy the home. At that point, the buyer usually has to make up the difference with a larger down payment or walkaway.

This scenario was widespread in 2010, as foreclosures swelled following the housing bust, resulting in a surge in homes being valued by appraisers below what some buyers were willing topay.

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Potential sellers market brings possibility of lower appraisals - Sun, 29 Mar 2015 PST