Homeowners & Appraisers See the Most Eye-to-Eye on Price in 3 Years

Homeowners & Appraisers See the Most Eye-to-Eye on Price in 3 Years | Simplifying The Market

In today’s housing market, where supply is very low and demand is very high, home values are increasing rapidly. Many experts are projecting that home values could appreciate by another 5% (or more) over the next twelve months. One major challenge in such a market is the bank appraisal.

When prices are surging, it is difficult for appraisers to find adequate, comparable sales (similar houses in the same neighborhood that recently closed) to defend the selling price when performing the appraisal for the bank.

Every month in their Home Price Perception Index (HPPI), Quicken Loans measures the disparity between what a homeowner who is seeking to refinance their home believes their house is worth and what an appraiser’s evaluation of that same home is.

March 2015 marked the first month of a three-year gap between what an appraiser and a homeowner believed a home was worth. That gap widened to 2.65% in September 2015 and had consistently hovered between 1.0% and 2.0% through November 2017.

The chart below illustrates the changes in home price estimates over the last three years:

Homeowners & Appraisers See the Most Eye-to-Eye on Price in 3 Years | Simplifying The Market

In the latest release, the disparity was the narrowest it has been since March 2015, as the gap between appraisers and homeowners was only -0.33%. This is important for homeowners to note as even a .33% difference in appraisal could equate to thousands of dollars that a buyer or seller has to come up with at closing (depending on the price of the home).

Bill Banfield, Executive VP of Capital Markets at Quicken Loans urges homeowners to find out how their local markets have been impacted by supply and demand: 

“The appraisal is one of the most important, although sometimes least predictable, parts of the mortgage process. The Home Price Perception Index is a way to illustrate the differences of opinion, and these differences affect everything from the type of mortgage a borrower can get to the expectations a seller has about the proceeds available upon sale of their home.”

Bottom Line

Every house on the market must be sold twice; once to a prospective buyer and then again to the bank (through the bank’s appraisal). With escalating prices, the second sale may be even more difficult than the first. If you are planning on entering the housing market this year, let’s get together to discuss this and any other obstacles that may arise.

About Les Sulgrove

Les is an Iowa native born in Des Moines and raised in the southwest Iowa town of Bridgewater. He has been a resident of Des Moines since 1982 and has been married to his wife Linda for over 35 years. Together they have 3 grown children, 7 grandchildren and make their home on Des Moines south side. He has been a licensed REALTOR® since 1990 and is Vice President at VIA Group, REALTORS®. Les is the 2011 Past President of the Des Moines Area Association of REALTORS® (DMAAR) and received the award of Salesperson of the Year by DMAAR in 2007 for his involvement and service to the Association. Additionally, he is active at the Iowa Association of REALTORS® and serves on local, state and national committees. He also owns and operates the national technology networking group CyberProfessionals. This group of real estate professionals meets twice annually across the United States to learn from each other and share new marketing ideas with heavy emphasis on current and future technologies and their use in the real estate business. Les’ hobbies include golf, photography and sarcastic humor. He and Linda spend many Saturday mornings from Spring to Fall at the Des Moines Downtown Farmers Market. He enjoys spoiling his grandchildren at every opportunity.

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