September 20, 2017 – Wayne, PA – Sage Realty, whose Realtors® help buyers find Main Line homes for sale, have noted a recurring trend in rising markets that both sellers and buyers should be aware of: The property owners’ estimates of their home values are often higher than the valuation given by official appraisers.
The trend and observed effect is also backed up by more rigorous studies. Numbers from Quicken Loans suggest that sellers in the northeast are often overestimating the value of their property by 1.94%, and even more in the Philadelphia area.
Such differences can lead to difficulty in getting mortgage approvals for Main Line homes for sale, particularly if the agreement is for full price. Banks financing buyers’ mortgages use the numbers presented by appraisers, so they will frequently refuse to offer a loan in the full amount of the seller’s asking price. Sage Realty has seen deals fall through because of this.
Disparities in the appraisal ratios have become more common since the housing bubble, when regulations were put into place in an attempt to avoid loan defaults caused by buyers acquiring homes that they could not afford.
A 2014 study on the effect of the regulations by Lei Ding and Leonard Nakamura of the Federal Reserve Bank of Philadelphia, help explain why the effect may occur. They state “Buyers, sellers, and real estate agents, as well as lenders who do not bear the risk of originated loans, all have a vested interest in getting an appraisal that is not less than the contract price and completing the sale. The way to ensure the deal is for the appraisers to assess slightly higher than (or equal to) contract prices.”
The regulations intended to have appraisals done by parties who were unbiased about the specific purchases being approved. In the aftermath, many appraisers have become very conservative, causing home sales that might reasonably be approved to fall through due to buyers being unable or unwilling to make up the difference in offered loan amounts.
In a rising market, such as the one we are experiencing, the impacts are more easily seen because competition for the relatively low number of Main Line homes for sale tends to push home prices up, while appraisal values may lag behind.
Sage Realty urges buyers and sellers to be flexible when working with Main Line home sale prices if they find themselves in disagreement with official appraisers. Working with experienced Realtors® may enable both sides to find ways to compromise, or in some instances, challenge the appraisal value.
About Sage Realty, LLC
Many Realtors® in Pennsylvania aid in the search for Main Line homes for sale, but Sage Realty’s mission is to find the perfect home for each client with no other concerns or conflicts of interest, which has made them trusted real estate agents in the Main Line area. For knowledgeable guidance in buying or selling Main Line real estate, contact 610-687-4000 or visit https://www.findahomeinpa.com/.