With inventory at an all time low in Potomac, Bethesda, Rockville, Chevy Chase MD & Washington DC, home buyers are stepping up and creating a new market with better prices than we have seen in a long, long time. The tides are turning and some are even calling this spring a sellers market. While buyers and sellers are moving forward with the market, there is something holding the market back: the appraisal.
Appraisers work backwards using comps from a different market (last fall and summer) and are currently holding the market down? They have stringent guidelines to follow and heavy oversight from the banking industry. The agents involved in the transaction can provide market comparables, a list of upgrades, the story behind the sale (multiples, market demand) and other materials that are pertinent but it will not necessarily change the outcome. Appraisers have been forced to be conservative and are very scared to make a wrong move or over appraise.
What is confusing is that sellers are getting multiple offers on their homes and some are even selling before they go on the market. Traditionally, a home is worth what a buyer is willing to pay. That logic is being tested. Today, a house is only worth what an appraiser is willing to appraise. Of course a buyer can overlook an appraisal and add more cash to the deal but many buyers will try and renegotiate a new price. It can really ruin the flow and good will in a transaction. Eventually, the appraisals will catch up to the new market and prices. Until then, it can be very challenging and costly for buyers and sellers!