In the Denver metropolitan area, Realtors and appraisers say bidding wars may be driving up home selling prices, but appraisals frequently are coming in much lower. Unlike in the past, though, sellers are less inclined to take less to preserve the deal.
“There are not enough houses, especially more affordable homes,” Kelly Moye, of the Colorado Association of Realtors said in a news release. “First-time homebuyers who don’t have a lot of cash are hit the hardest. Bidding wars are often driving up home prices, but appraisals have lagged behind. In the past, sellers would have been forced to lower the sale price, but not as much anymore. They are holding out, knowing there will be someone who is willing to make up the difference.”
Some Realtors are recommending buyers short on cash to lower their downpayment enough to make up the difference. However, they might be required to pay mortgage insurance.
“More importantly, you’re making sure your own client knows what the true values of that neighborhood are,” Moye said.
Appraisers know they will, at times, be forced to be that “bearer of bad news.”
"I deal in factual data. I don’t deal in speculation,” appraiser Warren Boizot, III said. “In the last two years, as many as eight out of 10 homes in this area appraise for less than their sales price, and it reminds me a little of the 2008 housing bubble. It just scares me, though, because sometimes I see people getting anxious and wanting to go a little faster than I am comfortable with.”