Once upon a time, appraisal values were something that were rarely spoken of outside of the lending world. But the aftermath of a worldwide pandemic has forced a lot of change and now, with builders and homebuyers facing new uncertainties, it’s time to take another look at how home appraisals work.
Anyone in the construction industry is likely painfully aware of the rising cost of lumber and other building materials like gypsum and concrete. And, no doubt, they have experienced significant and continued delays on many other materials. There’s a variety of reasons for the volatility in the supply chain right now.
What is Causing Costs to Rise
We could blame it on the months-long closures that disrupted shipping around the world. We could say that it was because down-line manufacturers stopped production during the pandemic as governors enforced non-essential employees to stay home. Or, we could say that our ‘just-in-time’ fulfillment business model wasn’t built for 2020.
The story is the same in the Lehigh Valley area as it is across the country, and mostly around the world. Builders are worrying about when they will be able to complete projects and what the final price tag is going to be. And homebuyers are faced with the reality of rising home costs as they struggle to compete with other buyers in tight markets.
How Home Appraisals Affect Financing
Our Lehigh Valley moving company has heard one story after another about homeowners getting stuck with hefty price increases that came in after a much lower appraisal. Typically, when a homebuyer is attempting to obtain financing, a home appraisal will be done to assess the value of the home to determine the financing that will be available. Recent comparable sales have traditionally been the barometer for measuring this value.
But the situation that the supply chain crisis is causing is an endless barrage of price increases so that the cost to build a home three months ago is wildly different than the cost to build a home today. And its likely the problem will continue through the foreseeable future, driving costs up through the next year. One building material supplier has sent out 23 price increase letters to builders over the last two years. That shocking number is roughly an increase between 2-10% every single month.
So, what happens when your home is appraised for $250,000 and then the builder comes back with a price increase and says it cost $275,000 to build this house? In most cases, the homebuyer will have to come up with the difference out of pocket which makes the home buying experience almost unobtainable for many.
A Better Solution
One thing that this supply chain crisis has highlighted is the need to change the home appraisal process. Instead of using comps from recent sales to determine the value of something being sold today, we should be taking the actual cost of materials into consideration. The burden of financing the cost difference should not fall on the homebuyer when the appraisal process isn’t working.
Our Lehigh Valley movers have been watching this trend for the last two years. We move a lot of families and during this intimate experience, we get to know the families that we are helping. We see their struggles firsthand and moving has become a more stressful experience. Our team aims to ease the burden by providing qualified, expert moving services to take your mind off one part of the process.
O’Brien’s Moving & Storage is one of the best movers in the Lehigh Valley, PA area. If you are relocating to or from the area, our team of dedicated and experienced moving professionals can help make your transition seamless. We’re a member of Allied Van Lines, providing nationwide coverage for your next move. Call today to get a custom moving quote.