Low inventory and high demand drive home prices in today’s fiercely competitive Chicago real estate market. As a result, we are observing a trend of growing appraisal gaps.
According to the latest Realtors Confidence Index from the National Association of Realtors (NAR), as many as 54% of homes in Chicago are receiving offers over the listing price.
Shawn Telford, Chief Appraiser at CoreLogic, elaborates:
“The frequency of buyers being willing to pay more than the market data supports is increasing.”
While this is great news for today’s sellers, it can be tricky to navigate if the price of your contract doesn’t match the appraisal for the house. This is called an appraisal gap, and it’s happening more in today’s market than the norm.
According to recent data from CoreLogic, 19% of homes had their appraised value come in below the contract price in April of this year. That’s more than double the percentage in the two previous Aprils.
The chart below uses the latest insights from NAR’s Realtors Confidence Index to showcase how often an appraisal issue slowed or stalled the momentum of a house sale in May of this year compared to May of last year.
If an appraisal is below the contract price, the buyer’s lender won’t loan them more than the house’s appraised value. That means there will be a gap between the amount of loan the buyer can secure and the contract price of the house.
In this situation, the buyer and seller are vested in ensuring the sale moves forward with little to no delay. The seller will want to ensure the deal closes, and the buyer won’t want to risk losing the home. That’s why it’s common for sellers to ask the buyer to make up the difference themselves in today’s competitive market.
Bottom Line
Whether buying or selling, let’s connect with real estate experts in Chicago at KM Realty Group LLC so you have an ally throughout the process to help you navigate the unexpected, including appraisal gaps.
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