Appraisal Waiver: What It Is and The Risks

We’re sure you’ve heard this saying over and over again but, we’re going to repeat it! The housing market is insane right now! There’s a high demand for houses but little inventory, which creates a seller’s market. It works in favor of sellers and might hurt buyers, but there’s a tactic changing the real estate market. It’s called an appraisal waiver. 

What is an appraisal waiver?

An appraisal waiver is an offer to waive the appraisal for eligible transactions, and historically, it’s somewhat rare. However, in the highly competitive seller’s market we’re living in, home sellers in the Austin area are increasingly requiring that homebuyers waive the appraisal contingency in their offers if their offers are to even be considered.

What happens after an appraisal is waived? 

When an appraisal is waived, it means the buyer agrees to purchase the property, even if the property doesn’t appraise for the total contracted price. The buyer is responsible for the difference between the appraised value and the buyer and the seller’s agreed price. Usually, the buyer brings the difference in cash to closing. This is also a strategy for the buyer to show their interest and commitment to the property since they are willing to pay the difference between the contracted price and the appraisal. 

How is it affecting the real estate market?

An appraisal waiver would be an excellent tactic for homebuyers in a regular market to negotiate the sellers’ list price. It also prevents buyers from price gouging. But in a seller’s market, home prices are being set by market demands instead of the actual home value. With an appraisal waiver, if the value is lower than the purchase price and it’s locked in, you will have negative equity from this transaction. 

Because of the high demand for homes right now, homebuyers are feeling the pressure. And with the market moving so quickly, sellers have a unique opportunity to ask more from buyers to get the best offer and see which buyers are serious about closing the deal. 

 

If you’re a home buyer or seller and need help navigating this fast, competitive market, contact us today! Reach out to us anytime at info@sagewilson.com or (512) 828-7074.

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