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Boring Midwestern City that's not even a 3rd-tier tech hub. Other boring Southern city that's also not even a 3rd-tier tech hub. Buyers are having to take on th

Boring Midwestern City that's not even a 3rd-tier tech hub. Other boring Southern city that's also not even a 3rd-tier tech hub. Buyers are having to take on the risk of having to cover any extra over appraisal in cash, consistently, while that used to be rare (and, yes, usually for "I am super invested, emotionally, in getting this particular house" reasons). My unremarkable suburban house in a boring city that's been building housing constantly and extensively for the last 10 years, is up like 25% in value over the last 2 years. We thought, based on extensive experience in this market, that we were already paying a bubble-induced premium of 15-20% when we bought it (possibly no longer true—thanks inflation). WTF.

s1artibartfast 4y ago
I think Inflation scares are a big part of it - at least it was for me. If inflation is 8.5% and a mortgage is 3%, the bank is paying me to buy a more expensive house. At the same time, If I hold and wait to buy, my savings are evaporating while the price goes higher.
otterley 4y ago
I think the appraiser is doing you a favor by not appraising it for the contract price in this case. Why would you want to overpay for a house and have to cover the financing shortfall yourself? Especially in a market that traditionally has slow RE price appreciation. Let the cash buyers suffer the losses. You'll thank yourself later.
- s1artibartfast 4y ago
  You're assuming that the deal doesn't go through if it doesn't appraise. In my market nearly all winning offers have waived the appraisal contingency
  - otterley 4y ago
    Not assuming that at all. I'm saying that if the appraisal doesn't go through, then the lender won't cover the remainder of the purchase price, and then the buyer will have to make up the difference out of his/her own pocket. At that point, I'd bail, because the appraiser is raising a red flag. But since you mention it, in the slower market being discussed here, I would definitely not waive an appraisal contingency.
    - s1artibartfast 4y ago
      sure, the appraiser is always providing the buyer a service by giving them an accurate appraisal (more information is better). If the buyer chooses to proceed, this can be a financial disadvantage reducing access to a highly leveraged loan.
    - corrral 4y ago
      > At that point, I'd bail, because the appraiser is raising a red flag. The point is, in a lot of markets, if you bailed on offers over this in the last couple years, you wouldn't be winning any bids in the first place, and wouldn't have been able to buy a house at all. The winning bids include guarantees that the buyer will cover the difference. If you won't do that, you'll lose to an all-cash offer from someone who will. If you're lucky, you won't be competing against superior offers that also waive all contingencies. I have no idea where all these people are coming from with hundreds of thousands in cash and the ability to cover several thousand more on top of the appraisal value, but they seem to be involved in damn near every sale the last 2ish years. Given how many are OK waiving inspections and such, I have to assume they're institutional buyers who can spread that risk around, not individuals who could be ruined by that kind of thing.
      - s1artibartfast 4y ago
        Counterpoint: as home prices keep climbing, many of the kind of things that would be caught by a home inspection become less and less financially relevant. When you're buying a million dollar house, 20K for a new roof is in the noise
      - otterley 4y ago
        Something seems a bit off, then, because if the market is appreciating, then the appraisers should be taking that into account. As another commenter said, they were certainly doing that in hot West Coast markets like SF and Seattle. Both houses I purchased (each in those locations) appraised at the contract price, and I bought them both within the last 7 years.
        4y ago
- deleted 4y ago
  [deleted]

s1artibartfast 4y ago

I think Inflation scares are a big part of it - at least it was for me. If inflation is 8.5% and a mortgage is 3%, the bank is paying me to buy a more expensive house. At the same time, If I hold and wait to buy, my savings are evaporating while the price goes higher.

otterley 4y ago

I think the appraiser is doing you a favor by not appraising it for the contract price in this case. Why would you want to overpay for a house and have to cover the financing shortfall yourself? Especially in a market that traditionally has slow RE price appreciation. Let the cash buyers suffer the losses. You'll thank yourself later.

s1artibartfast 4y ago
You're assuming that the deal doesn't go through if it doesn't appraise. In my market nearly all winning offers have waived the appraisal contingency
- otterley 4y ago
  Not assuming that at all. I'm saying that if the appraisal doesn't go through, then the lender won't cover the remainder of the purchase price, and then the buyer will have to make up the difference out of his/her own pocket. At that point, I'd bail, because the appraiser is raising a red flag. But since you mention it, in the slower market being discussed here, I would definitely not waive an appraisal contingency.
  - s1artibartfast 4y ago
    sure, the appraiser is always providing the buyer a service by giving them an accurate appraisal (more information is better). If the buyer chooses to proceed, this can be a financial disadvantage reducing access to a highly leveraged loan.
  - corrral 4y ago
    > At that point, I'd bail, because the appraiser is raising a red flag. The point is, in a lot of markets, if you bailed on offers over this in the last couple years, you wouldn't be winning any bids in the first place, and wouldn't have been able to buy a house at all. The winning bids include guarantees that the buyer will cover the difference. If you won't do that, you'll lose to an all-cash offer from someone who will. If you're lucky, you won't be competing against superior offers that also waive all contingencies. I have no idea where all these people are coming from with hundreds of thousands in cash and the ability to cover several thousand more on top of the appraisal value, but they seem to be involved in damn near every sale the last 2ish years. Given how many are OK waiving inspections and such, I have to assume they're institutional buyers who can spread that risk around, not individuals who could be ruined by that kind of thing.
    - s1artibartfast 4y ago
      Counterpoint: as home prices keep climbing, many of the kind of things that would be caught by a home inspection become less and less financially relevant. When you're buying a million dollar house, 20K for a new roof is in the noise
    - otterley 4y ago
      Something seems a bit off, then, because if the market is appreciating, then the appraisers should be taking that into account. As another commenter said, they were certainly doing that in hot West Coast markets like SF and Seattle. Both houses I purchased (each in those locations) appraised at the contract price, and I bought them both within the last 7 years.
      - 4y ago
deleted 4y ago
[deleted]