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Appraisals are a very hot topic these days.

The market is moving very quickly. And there seem to be more and more buyers with significant amounts of cash.

In my opinion, appraisals come in 3 varieties:

-A Private Party appraisal (for divorce, tax or estate purposes)

-A Private Party appraisal (for sellers with agents who need guidance)

-A Bank appraisal (to determine a willingness to lend)

But 99% of the time, when we hear about appraisals, and appraisal contingencies, they almost always pertain to a bank appraisal.

For American Real Estate market is powered by mortgages. For millions of people, they are the only path to homeownership.

The catch is: Mortgage Lenders will not lend on an agreed purchase price that is not supported by a written property appraisal.

And in markets like this, appraisal shortfalls are incredibly common. With low inventory and significant buyer competition, many buyers are leveraging the situation to gain an edge over their competition.

That means these buyers are winning-over sellers by agreeing to pay the difference in cash, in the event of a low appraisal, that doesn’t support the contract price. And buyers who don’t have the cash to remove this risk are being passed-up.

We joke that a Real Estate agent (when the buyer is financed) must sell a property twice…Once to the buyer, and once to their lender’s appraiser.

This just doesn’t apply much anymore.

And as the market moves forward, more data builds up, and appraisal issues will become less of an issue.

Once cash-heavy buyers lose their ability to leverage their lack of an appraisal contingency, financed buyers will once again move towards the top of the ladder…because usually their offers are the highest.

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