What is the explanation for a very low appraisal in a market that is supposed to be “hot”?

The appraisal process is based on looking backwards and in hot markets, it is hard to find comparable sales. We wish there was a better answer. As a seller, one of the keys is to make sure the purchaser is less sensitive to a missed appraisal. If a Buyer A is putting down 25% and Buyer B is putting down 5%, you might be wise to select Buyer A and try to get them to waive part, if not all, of any appraisal contingency. Similarly, as a buyer, don’t get in bidding wars if you are a Max FHA buyer. You will cost yourself inspection and appraisal fees, as well as time, and likely miss out on other opportunities. The lack of inventory is driving pricing up but unfortunately, sometimes the rising prices outpace the appraiser’s ability to find the supporting sales. With anything, preparation is key. Knowing when an appraisal is likely to come in low allows you to put contingency plans in place to handle it if/when it happens.

Want more info? We wrote about determining a value for your home, here.