So, what is the current state of our local market? I heard it best on a recent radio show about the current state of the national housing market. It looks like this: During the pandemic, the market was running at 210 km/h. Now we’re back down to 65 mph. Admittedly, the local market has slowed down, but we are by no means at a standstill. Homes are still listed, but there are not as many buyers coming out of the starting gate to absorb inventory as before. We may be returning to a “normal” summer market.
As we enter a slowing market, appraisers are reporting that lender underwriters are more discerning about the type of neighboring homes and the features used to appraise the home in question. Some appraisers experience more scrutiny of their appraisal reports. Gone are the days when it was possible to tip the scales up and down to receive higher value, especially when it comes to high-end homes.
Lenders typically sell their loans in the secondary mortgage market, so loan underwriters are more attentive to how investors view their records. The larger the files, the harder they are to sell. So Freddie Mac and Fanny Mae, the entities that back government-backed loans, are treading cautiously at the moment.
All of this will have an effect on how mortgage underwriters view appraisals. Therefore, do not be surprised if the price of a house set on the high end does not value at the contract price. If you are preparing to list a home, take precautionary measures regarding the list price. In a down market, the strategy is to set a list price lower than other competing houses.