Princeton Town Topics – Let’s Talk Real Estate – March 10, 2021
WHAT IS AN APPRAISAL GAP?
Fast moving real estate markets like the one we’re in right now can cause challenges when it comes to the appraisal of a home or property. Right now, low inventories and an abundance of buyers is resulting in bidding wars and prices are trending higher.
But sometimes appraisals aren’t catching up with the market, resulting in an appraisal gap, or a shortage between the appraised value of the property and the selling price. Lenders will not finance a property for more than its appraised value, leaving buyers and sellers in a bind. If the gap is only a few thousand dollars, the buyer may decide to make up the difference in cash. However, if the shortage is larger, the situation may be more complicated.
This is where you let your real estate agent use their expertise. On the seller’s side, your agent may be able to challenge the appraisal with a compilation of comparable market data. On the buyer’s side, your agent may be able to negotiate a new price or split the difference. Appraisers that are familiar with the local market are able to adjust for this type of market volatility.
