What’s My Property Worth?
With the real estate market as strong as it is some lenders are waiving the appraisal. This happens most often when a buyer is putting down a hefty amount like 40% or more of the purchase price and they have a strong credit score. However, the appraiser themselves are never privy to the exact reasons a lender will forgo an appraisal. Most likely the lender feels that their position is adequately secure both with the additional initial equity and the fact that prices are expected to continue to raise a minimum of 5% a year over the next 5 years.
This last year alone, the average residential home in Nevada rose an average of $64,000 dollars. In addition, it does not appear that foreclosures due to the pandemic or any other reason are going to escalate out of the ordinary any time soon.
Obviously, if you are buying a property for cash there isn’t a requirement to have an appraisal done. However, it is always in the buyer’s best interest to obtain an appraisal so that they are not over paying for a property. If they do overpay because of the nature of the market, at least they will be fully aware of what they are getting into.
When it comes to using cash purchases as a comparable, normally appraisers view these types of transactions and values as the higher end of the market. But here again, it is all taken into context. If the cash transaction was a year ago in a fast-moving market, that view of the transaction may be different.
When Are Scheduled Appraisals Not Completed?
For the most part this happens when there is a lot of serious deferred maintenance or the property is being sold FHA of VA. As an example, you have a large hole in your floor most lenders are going to tell the appraiser just to turn around and not waste their time. That seems fairly obvious. However, it may be as little as peeling facia boards for an FHA loan. So, not only does it depend on the lender, but it greatly depends on the condition of the property. If you are doing a refi with a hard money lender at 18% or more, many times there is great latitude in the overall condition of the property.
Right now, appraisers are seeing a little bit of market stabilization. Not every property is getting multiple offers like they were a couple of months ago. A lot of it is price sensitive however. Well kept properties at lower price points are still getting a lot of activity.
Be sure and subscribe to the French Workbench podcast hosted by Daniel French every Saturday morning for the most relevant housing updates. If you would like touch base with a property manager, call us at 702-916-2222. We would be happy to discuss any challenges you may be facing and there is never any obligation.