Appraisals in Denver
Let’s talk about a frequently asked question we receive when working with our buyer and seller clients here in the Denver metro area!  


What are the chances the appraisal will come in low on this home? 

In almost every instance our clients are either writing offers well above the home’s list price or receiving offers on their home sales well above list price. So, wondering about the appraisal is a very valid question. For home buyers, it’s what I’m looking at each time we write an offer on a home. It’s what I always address when negotiating the best terms possible for my seller clients.

 

So, what are the chances the appraisal will come in low on this home? 

Well, the quick answer is that there’s a high probability that the appraisal will come in low. If you’re writing an offer over list price, most likely you’ll be setting a new high price for the neighborhood which means there are probably minimal comparables. That’s usually the case in an appreciating market (what we’ve been in for 9 years).  So if you’re a buyer and planning to waive the appraisal or include appraisal gap coverage in your offer, you should very much be prepared mentally and financially to use that appraisal gap coverage. If you’re a home seller and receive an offer well above list price with NO appraisal gap coverage, you should plan to NOT get that price if the appraisal comes in low.

But, in reality, appraisals have gone differently than expected. Although there’s a high probability that an appraisal will come in low (when the price gets bid up), appraisals have been coming in at value or better more often than not.  In fact, in the last 15 buy or sell transactions we’ve completed in the last few months, I’ve only seen the appraisal come in lower than the purchase price on two occasions (both were on the buyer side). Using those statistics, there’s an 87% chance that your appraisal will come in just fine. Those are much better odds than what you probably expected I’m sure! (As a side note: When I’m listing a home, I always prepare an info packet for the appraiser so that they understand the activity, pricing, upgrades, etc – this has been extremely helpful for my seller clients over the last several years, especially this year). 

If you’d like to discuss the details of how appraisals work, what appraisal gap coverage is, or how to best be prepared whether buying or selling, let me know. I’d love to chat more and help you feel confident and in the know!

-Drew