Rising Markets – Proof or Not?

by Hamp Thomas on 03/22/16

Let’s talk about “Rising Markets.” We hear this term more and more often and many Realtors are claiming that appraisers just don’t understand what is happening and are flat out killing deals for no good reason. Pretty strong statements and many times, way off base.

In a true “rising market,” there has to be some evidence and history. Obviously, one sale doesn’t define a rising market. So, who defines a rising market and what data do they use to support that opinion? If they’ve seen multiple offers for the same house and this happens on every new listing in an area, there’s no doubt you have a rising market. In those cases, agents and appraisers should be able to point to the listings that have sold above list price, and be able to determine a percentage of rising values. If you have the last five houses that have sold at between five and six percent above the listing price, you have a pattern that can be documented on paper. It’s “proof” that an appraiser could use to show the rate of rising values and not have an issue with a low appraisal. Agents should be able to help appraisers in these circumstances and if it is truly a neighborhood with escalating values, there has to be some evidence of that growth. And, this kind of information should be reported in the Closed/Settled MLS data!

However, just because an agent convinces one client to pay more than list price does not equate to a rising market. True rising markets have real proof and appraisers deal in facts. Sometimes, the appraisers are not to blame for a low appraisal. They are simply trying to protect the home-buyer and the mortgage lender. As long as you are working with a local appraiser, you should not have a problem in true rising markets.

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