Real estate agents: A game-changing year for home values—and the appraisal process

Homebound for the greater part of 2020, Americans have grown more attuned to the things they value about their current homes—and the things they don’t. With the lines between work, school and personal space blurred or outright erased, it’s understandable that homebuyers are itching for more elbow room, or at least a change of scenery. Low mortgage rates only add to the appeal of buying a new home.

More than a passing whim, this nationwide ‘itch’ is proving acute, and driving historically high price growth and record-low inventory. In November, the median home sale price increased 16% year over year to $322,828, the highest on record. The same month, active listings plummeted 29% from 2019, to the lowest level on records.

With home prices inflated, your clients may be even more concerned about the appraisal, which has long been a stressful point in the home-buying experience. After all, if the lender’s appraiser doesn’t think the house is worth what the buyer is willing to pay for it, the deal can fall through if the buyer isn’t aware of their options. And with lockdown orders in many areas of the country, buyers may also be worried about how an accurate appraisal can even take place during a pandemic.

What to expect during a COVID-era appraisal

Even amidst public health restrictions, homes still need to be priced accurately to secure the right lending terms. Early in the year, some lenders began temporarily allowing desktop appraisals and exterior-only appraisals. But in-person appraisals, which are far more accurate, have also continued in many areas, with new healthy/safety protocols in place.

As the pandemic worsens over the winter months, however, in-person appraisals may once again become less common, and new solutions may be needed. Enter, the virtual appraisal.

A virtual appraisal technology platform can give appraisers the objective data they need to accurately determine the home’s value, without stepping through the front door. In a virtual appraisal, professional data collectors will remotely guide the homeowner through the property to capture the right information and pictures on their phone, essentially conducting a real-time, virtual tour.

While the process may look a little different than it has in the past, the objective of the appraisal remains the same: assess the home’s worth, which may not be the same as the purchase price.

Homebuyers have options, even if the appraisal comes in low

If the appraisal does come in lower than the purchase price, real estate agents have an important role to play in helping their buyers know that there are ways to save the deal. They just may need to pivot and renegotiate, using the low appraisal as an opportunity to negotiate a lower price. Alternatively, the buyer could challenge the appraisal.

By helping your clients stay informed about how the pandemic is affecting home values and appraisals, you can help them not only find the deal that’s right for them—you can give them the understanding they need to see it through to closing, too.