In the Denver Metro area, realtors and appraisers say bidding wars may be driving up the selling price, but appraisals are frequently coming in much lower. Unlike in the past, though, sellers are less inclined to take less.
“We agreed on it. We were under contract,” said Melissa Abels, who had already started packing her bags to move after signing the contact on her dream home in Parker. ”Our loan was approved. We were good to go, and sort of the last step was getting the house appraised.”
But that's when she got the bad news.
The home appraised for $12,000 less than the agreed sale price.
“I thought, 'Oh my Gosh, we’re going to have to get our apartment back. Where are we going to live if this doesn’t work?'"
It is a common problem lately in the Denver Metro area, which has seen a decrease in housing inventory and an increase in demand.
"There are not enough houses, especially more affordable homes," said Kelly Moye with the Colorado association of realtors. "First time homebuyers who don't have a lot of cash are hit the hardest."
Moye said bidding wars are often driving up home prices, but appraisals have lagged behind.
In the past, she said, sellers would have been forced to lower the sale price, but not as much anymore.
"They are holding out knowing there will be someone who is willing to make up the difference," said Moye.
Some realtors are recommending buyers short on cash to lower their down payment enough to make up the difference. The catch? They might be required to pay mortgage insurance.
"More importantly, you're making sure your own client knows what the true values of that neighborhood are," said Moye.