It’s no secret that the real estate market has been crazy over the past year, especially in the Austin area. One aspect of the current market that is contributing to the insanity is appraisal waivers. Let’s take a look at what they are and how they’re affecting the market.
What are appraisal waivers?
An appraisal waiver is an offer to waive the appraisal for eligible transactions. Previously, this was an option given to qualified homebuyers at the lender’s discretion, but because of the extremely competitive seller’s market, sellers are moving to require appraisal waivers.
What does this mean for homebuyers?
Sellers requiring appraisal waivers means that the buyer can’t cancel the contract if the appraisal doesn’t come in at the contract price. Essentially, the buyer would be required to pay the difference between what the appraiser values the home at and the price the buyer and seller have agreed upon. The buyer would be required to bring the difference in cash to the closing.
What are the risks of an appraisal waiver?
Appraisal waivers put a lot of cash at risk in the market. In a typical sale, the appraisal value is a great technique for homebuyers to negotiate the contract price with the sellers. It protects the buyers from price gouging, but currently, the prices of homes are being set by the current demands of the market rather than the values of the homes in a normal market. With an appraisal waiver, if the valuation of your home comes in lower than your purchase price, but said price is already locked in, you will come into the purchase with negative equity.
The low-inventory, high-demand market we’re experiencing is putting extra pressure on homebuyers and bolstering Austin property values. With the market moving so quickly, sellers have an opportunity to ask more from buyers to get the best offer they can from serious and capable buyers.
If you’re in need of tips to stay competitive in today’s market, or you’re in need of a knowledgeable team to help you navigate the fast-moving market, contact Prism Realty. We’re here to offer our expertise, and we’ll be by your side every step of the way -– give us a call at 512-676-5842.
