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Home appraisal’s ugly history and uncertain future

This is Part I of a deep dive into the home appraisal industry. Today we explore the origins of the appraisal industry and its current lack of diversity.

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Real Estate

Regardless of price, Austin homes still flying off the market

Nation's hottest housing metro continues to attract Silicon Valley transplants

Austin is still the nation’s hottest housing market, as tech workers continue to flock to the Lone Star State’s capital. In 2021 alone, 1,440 Austin homes have sold for between $100,000 and $299,999 above asking price, and 72 have already sold for $300,000 or more above asking price, per a recent study from Redfin.

At this time last year, only two homes had been sold in Austin for more than $300,000 above asking price.

More than 4,500 homes in Austin have sold for between $25,000 and $99,999 above asking price. Homes are staying on the market an average of 24 days, Redfin reported.

In all, nearly 74% of Austin homes sold above their asking price in April, and the metro had the nation’s highest price growth that month, said John Dawson, an Austin-based Redfin agent.

“I recently sold a home in Austin that was listed at $565,000 and closed at $715,000,” Dawson said. “We received about a dozen offers, which is actually a low number by today’s standards. The winning buyer also waived appraisal and financing contingencies and dropped off cupcakes that matched the interior colors of the house, which was a nice touch because the seller is an artist and the home is unique and colorful.” 

The jumbo market for brokers is back in a huge way

With intense demand for homes on the higher end of the pricing spectrum, new updates to the QM rule that went into effect on March 1 and growing investor interest in jumbo mortgages – this is the perfect time for the broker community to support their clients with speed and ease.

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The median Austin home-sale price in the Texas capital increased 42.3% year over year, to $465,000. Net inflow into Austin — defined as the number of people looking to move in minus the number of people looking to leave — has doubled over the last year, Redfin reported.

In April, Jay Garrett, a loan officer at Supreme Lending’s McClellan Branch in Austin, said he was seeing 10 to 40 offers on houses no matter where they are in Austin, and cash offers are winning the day because sellers don’t want to have to worry about the house appraising too low for someone who needs financing.

“If a seller has those multiple offers, they are looking first at cash offers and may even consider a lower cash offer because they don’t have to worry about the property appraising for that price,” Garrett said. “If they get a higher offer that has financing, then when appraisal comes back, the buyer is going to renegotiate the sales price to be closer to appraised value.”

Austin has become a popular destination for homebuyers for several years now, and the onset of the COVID-19 pandemic drove home prices up even higher as inventory dwindled. In 2020 and 2021, it became especially popular for remote tech industry workers looking to move from the Bay Area and Silicon Valley, in California. Because of those movers — many of whom have deep pockets, thanks to their tech salaries and cash from selling their expensive California homes — locals are struggling to compete with out-of-town homebuyers for the already limited supply of homes.

In fact, Redfin reported that most out-of-town movers’ budgets are 32% higher, on average, than that of Austin locals ($855,000 versus $650,000).

“I’m encouraging sellers to price their Austin homes realistically, because some of the ‘comps’ aren’t truly comps,” Dawson said. “Some are cases of an extremely motivated buyer who was willing to pay way over asking price to secure the home they wanted. For instance, I sold a home last week for $635,000. If I were to list the next-door neighbor’s house, assuming it’s identical, I’d list it for around $590,000 because that’s right around where most of the offers came in.”

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