Will My House Appraise for Its Selling Price? 10 Tips to Avoid a Low Valuation

If you’re selling a home in the current shifting housing market, you may be wondering, “Will my house appraise for the selling price?” In today’s market, with rapid home price increases and still-limited inventory in some markets, over half of homes are appraised for more than their sale price — the highest share since March 2020.

That’s according to an analysis by Corporate Settlement Solutions (CSS), which looked at home sales in 10 states on the East Coast and Midwest during the first half of 2024. In that time, only 8.4% of sold properties had a contract price above the appraised value.

The odds of an appraisal coming in low are just that — relatively low. To quash any worries, we’ll take a closer look at the appraisal process, the factors that can lead to a low valuation, and expert tips to prevent this from happening.

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Editor’s note: This post is for educational purposes and is not intended to be construed as financial advice. HomeLight always encourages you to consult your own advisor.

Trends and changing market conditions

The 2024 National Association of Realtors® (NAR) Home Buyers and Sellers Generational Trends survey reveals that 25% of buyers paid more than the asking price in the 12-month period ending June 2023. The largest share of buyers paid the full asking price (31%), followed by buyers who paid 95%–99% of the asking price (27%).

With inventory and home sales both seeing positive growth, 2024 buyers have greater leverage when it comes to pricing. NAR Chief Economist Lawrence Yun described further significant price hikes as “unlikely” as we approach “a balanced market condition.”

In a slower market, homes frequently appraise for more than the sale price, which is what we’re seeing play out now. Although inventory is improving, the market remains in favor of sellers, making comparable sales (or comps) harder to come by. Additionally, the rapid appreciation of home prices has made accurate valuations more challenging.

When does a home appraisal happen, and why?

Whenever a buyer is financing the purchase of a home or refinancing a mortgage, an appraisal of the property is typically required to assure the lender that the loan-to-value (LTV) ratio meets their underwriting guidelines. This is according to the Appraisal Institute, the nation’s largest professional association of real estate appraisers.

Lenders want assurance that the buyer isn’t over-borrowing since the home serves as collateral for the mortgage. If the borrower defaults on the mortgage, the lender wants protection against lending more than it might be able to recover.

The appraisal process involves an impartial qualified appraiser who is licensed or certified. The appraiser collects information and data in order to determine the property’s value.

from HomeLight Blog https://www.homelight.com/blog/will-my-house-appraise-for-selling-price/