Taking the pulse of recent appraisals vs. actual closing costs

[Richie Thomas]

Hey y'all, trying to gauge how appraisals are coming in these days, compared to closing prices.  In a red-hot market like Huntsville/Madison, I imagine appraised prices typically come in lower than actual closing prices, right?  If so, how far behind are appraisals lagging, compared with current market conditions?

Curious about both pre-existing homes and new construction, i.e. whether or not appraisals more closely match closing prices for new construction.

[Michael S.]

We have yet to ever have an appraisal come in for less than our offer amount that was accepted by the seller. 

Conversely, we've had several times where the appraisal was 5 figures higher than what we offered and was accepted by the seller.  

[Sonia N.]

Out of the 7 SFR properties we purchased last year in Huntsville, only 1 came in about $8,000 lower and I think it was actually undervalued but it gave us ammunition to go back to the seller to renegotiate. We ended up splitting it so the price came down $4,000. 6 months in, valuation is $30k higher than our sale price.

[Corby Goade]

I'm not in Huntsville, but every market in the country is "red hot" so the math is the same. 

Appraisers are completely independant contractors, they have no motivation to perform in any way. I've had many appraisers make every effort to reasonably make a deal work and I"ve also had many appraisers that refuse to be flexible, use ridiculous comps and seem to be on a personal mission to keep new people from being able to move in to our market. 

That said- production builders control their appraisal environment to the best of their ability. If a builder is building an entire subdivision, they typically do not negotiate prices, but will sometime offer concessions on closing costs, upgrades, etc- because that does not effect the sales price. Once they get the first couple appraisals in a new subdivision, they've created their own comps and have established consisten value for their builds. So- in general, you're more likely to get a new build to appraise if it's in a new subdivision being built by the same builder, but you'll have no leverage to negotiate a lower price. 

Good luck!