First-Time Homebuyers at Higher Risk of Overpaying for Homes

CoreLogic: First-Time Homebuyers at Higher Risk of Overpaying for Homes

Courtesy of CoreLogic

First-time homebuyers are at a higher risk of overpaying for homes due to appraisal gaps, according to a new report by CoreLogic. Appraisal gaps occur when the appraised value of a home is lower than the agreed-upon sales price. These gaps often lead to delays, renegotiation, additional payments from buyers to cover the shortfall, or even the cancelation of the sale. In June 2024, 8.6% of U.S. home sales were appraised below the contract price, down from 10.7% a year earlier. Here's the breakdown:

• Starter Homes: 9.6% had appraisal gaps, down from 12.1%.

• Homes of 3,500sf or More: 7.1% had appraisal gaps, down from 8.3%.

Ralph’s Take

Although we've been fortunate to avoid appraisal gap issues in our transactions, we prioritize discussing them with every client. Buyers should thoroughly review comparable sales and market trends to determine the fair value of the homes they bid on. Sellers, on the other hand, need to understand appraisal gaps and waivers when considering offers, as these factors can greatly influence the outcome of the sale.