Well, the day we have been predicting for years is finally here, it seems.

With the rapid rise in home prices as result of miniscule inventory, low appraisals were eventually going to happen.  Over the past two years, I believe we had 3 low appraisals in total.  Over the last two weeks, we have had 5.  The market is crashing ZOMG right?  No, not really.

Let's digress a bit to talk briefly about inventory.  Let's look at home inventory in the month of May over the last 8 years:

2017: 1,253,854 homes

2018: 1,156,910

2019: 1,180,920

2020:  928,370

2021:  447,662

2022: 479,462

2023:  582,441

2024:  Projection: 740,000

As you can see, we are (and have been) critically low on inventory.  Add to the equation rising interest rates, folks just simply not moving due to having locked in low rates, inflation, election uncertainty and what not, it's a brutal market out there to buy and sell.  Yes, I said sell. 

Wait, what?  Why is it hard to sell?  Well, if you are simply looking to sell, then it's a bit easier.  Maybe you already have another home, or maybe inherited one and need to sell it.  Moving out of the area and to one less populated?  Much easier.  But sell and then immediately buy?  It can be harder than you think.  Which brings us back to our appraisal problem.

When buying a home right now, if you aren't making an over-asking offer with some type of appraisal guarantee, unfortunately your chances of success are low.  Period.  The conundrum lies herein:  The asking prices of homes are often slightly inflated to begin with, and then multiple offers forces the homes to go massively up and over even what is considered feasibly realistic.  If you are a seller and see a huge number being thrown your way, please, please, listen to me and don't count your eggs before they hatch.  Yes, the buyer made you a grandiose offer and even with a pretty appraisal guarantee, you aren't going to hit the offer number in most cases (unless you got a full appraisal waiver or guarantee).

Here's an example of my listing that just appraised low:

I met with my seller, and we agreed that $335k was the likely appraisal price.  My seller wanted to try for a bit more due to being a ranch, etc.  So we listed at $345k.  We got multiple offers and the winning offer as $380k!! with a 25k guarantee.  My seller was elated, but I encouraged her to pump the brakes a bit and be hopeful that we will get close to that number, but to not count on it.  Sure enough, it appraised at $335k on the nose.  With the $25k guarantee, it sold for $360k.  My seller was disappointed she didn't get the $380k, but elated to get $360k overall. 

The problem herein lies when a seller is represented by an inexperienced Realtor who doesn't properly prepare their seller for the most realistic scenario.  It would be especially devastating if the seller was absolutely counting on all that money for a particular reason and now isn't getting it.  At the end of the day, proper planning and thorough discussion goes a long way.  Who you work with matters.