Every market has cycles. For some industries, the cycles are more predictable than others – but one things for sure, no one part of any market cycle lasts forever.

In real estate, most business cycles overlap with trends in the mortgage business – the one I want to talk about today is that of appraisals.

The way I see it, there are three phases of the appraisal cycle:

1. Ascending Markets – This is the type of market we are in today nationally. In this type of market, buyers are willing to pay a higher sale price than what appraisers can support in some cases.
2. Stagnate Markets – This is the perfect alignment where appraised value and market value, what the buyer is willing to pay, marry.
3. Descending Markets – This is a market where current sales may begin to slow, thus the appraiser can support a higher value than what the buyer pay be willing to pay.  

We're all aware the inventory crisis facing our country as a whole – nationwide there is not enough homes available for sale to support the demand of buyers – so in this case we would say we're operating in an ascending market. While this is great for sellers and the listing side of the industry, it can sometimes pose appraisal challenges for mortgage financing.  Buyers are willing to pay more however the comps cannot support the price, thus resulting in further negotiations, greater down payments or cancelled contracts.  How many of you can relate? Frustrating maybe an understatement.

While the media has given much attention to the ascending market view of the industry, some of our realtor partners have shared with us that this may not hold true in certain pockets of our markets locally.  With this in mind I would like to share a strategy we have seen prove to be successful in this type of market – seller concessions.

Remember, in a descending market an appraiser can substantiate a higher value for a property than the market may be willing to pay. In these cases rather than lower the sales price, we can keep the price higher but instead give the buyer credits to cover their closing costs and prepaid items.  Both seller and buyer net the same, but now we are moving inventory by saving the buyer thousands of dollars in out of pocket expenses. Both parties are accomplishing their intended goals.

Great agents thrive regardless of market cycle's through experiencing the changing cycles firsthand and by noting the successes and failures of those who've come before them. If you are an agent that has any tips or tricks for how you've thrived in markets such as the one we're in today, please give me a call directly at 561-864-2458, I'd love to hear from you.  

As a reminder, we will be having our next Facts and Figures: State of the Market Call next Tuesday the 14th at 11:45am. This is a fantastic opportunity for those agents seeking to become the authority on real estate in their respective communities. 1x a month, the 2nd Tuesday of each month, for 15 minutes is all it takes to help make you the go to agent in your community. If you have not already RSVP, please do so by sending an email to [email protected] or by calling me at 561-864-2458. I look forward to having you join us.

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 I appreciate you joining me today, hopefully you can find a way to apply your shot into today, until tomorrow, have a better day today than yesterday.

The views of this blog, "Your Morning Shot" podcast, and on this site in general are solely those of the authors, Matt Weaver (NMLS-175651) and Zack Lewis, and do not express the views or opinions of Finance of America Mortgage.