The real estate market in the Boston area has been crazy lately and that’s adding up to trouble for both buyers and sellers.
Demand is way up and inventory is way down. That means buyers are all chomping at the bit to bid on the few houses that are on the market. “I’ve had clients this spring who have offered on properties without even seeing them,” explained realtor Kerrianne Ciccone.
In the most popular neighborhoods, sellers are routinely getting multiple offers above the asking price. While that may sound like great news for Ciccone’s clients like Neil Maniar, it can create some problems. “You never quite know what you are going to get into when you sell your house,” Maniar said.
One of the biggest unknowns in the current market is the appraisal. If a bidding war pushes the price above asking, the appraisal may come in too low.
Appraisers use recent sales to set the value of a home, but prices have been rising so fast that sales from a few months ago are out of step with current rates. That, according to Boston realtor P.T. Vineburgh, can put both buyer and seller back to square one. “It could completely create an inability for someone to secure financing,” he said. “Our company has definitely lost deals,” he added.
New rules to avoid another mortgage meltdown are also causing problems. Banks can no longer hire their own appraisers and that means appraisers are sometimes sent to unfamiliar territory. Vineburgh says he almost lost a deal because an appraiser from the Cape was sent to evaluate a condo in the Back Bay.
“He valued the parking space at like $20, 000,” he said. You may recall a parking space in that neighborhood recently sold for $560,000.
If you are a buyer and your appraisal comes in low, here are a few things to try.
Put more money down. The bank is more likely to sign off if you improve the loan-to-value ratio.
Renegotiate the price with the seller. They may be willing to come down rather than start from scratch.
Find another bank and hope the appraisal comes back higher.
Everything worked out for the Maniars, but it was a stressful time. “There certainly were a couple of knots in our stomachs,” he said.
Rising interest rates could put a damper on this frenzied market, but as long as inventories stay low, there will still be stiff competition for the few homes that are available.