🧐 Recent Jumbo Appraisals over Sales Price - What do lenders know investors don't?

[AJ Wong]

Fool me once - shame on you. Fool me twice - shame on me. 

Several recent transactions have had appraisals come in significantly HIGHER than their sales price including: two jumbo transactions and my own personal summer purchase.  

One was $50K higher (4%) and another was a full $80K (6%) over the negotiated sales price. I often edify appraisals - as a check and balance on parties: buyer, sellers and both representatives need to somewhat agree on valuation and the appraisal protects the lender and buyer as an independent third-party opinion. Notably - typically for larger 'jumbo' loan transactions there is a secondary appraisal or lender review. 

So what accounts of this uncommon and growing (dare I say) trend? Well..this time of year sellers (at least here in the PNW) get a little more motivated to sell prior to the slower winter months. ALSO - asset prices are up. Why not prime real estate? To this moment I can make the argument that coastal PNW real estate in many areas is still somewhat undervalued (and under-appreciated) - literally. The replacement costs for some properties far exceed their sales prices and in comparison to similar homes in alternative coastal locations - the price and value differential is often dramatic. 

It's not all apples to apples of course. The Oregon Coast is remote, sparsely populated  - and NOT for everyone. But for regional (or out-of-state) investors that it is for - there is not much alternative for the price point. Perhaps that is what some lenders and their evaluators perceive as well? "All of this for $xxx...seems like a solid value." 

A good indicator of healthy appreciation is raw land value. When I landed in Oregon pre-pandemic (2018) coastal cottages were $100K (and on market for 10 years!) and solid 1/5 acre coastal lots were $40-50K and you could take your pick. Nowadays-  those lots are hard to find for $100-150K and shovel ready (those with utilities in place) can often ask $250K+ in prime areas with ocean views or access and they are increasingly few and far between and sell FAST - because they are worth at least a bitcoin or two..

There are a lot of drivers of PNW coastal appreciation including; societal and environmental refuge and retreat,  generational wealth transfer, demand growth, invest-ability and maybe most importantly - location. The same factors that limited remote coastal growth are the exact ones that are driving it today. 

Personally - my preferred destinations are as far from humanity and as healthy as possible. One growing guest demographic is...young, affluent global Fly Fishermen & Women. We plan to cater to adventurers with our riverfront fishing cabin that also appraised for $35K (9%) over the sale price..maybe it was the 2.25 acres of nearly off grid awesomeness? Something that we value tremendously (regardless of the appraisers opinion ) and are working on adding an off grid hot tub, outdoor sauna with water side jungle-gym. Even if no one books it - we will appreciate it..whilst it appreciates. The above sales price appraised value was a nice transactional bonus. 

What do you think  - are (lenders) appraisers' accurate or does it just matter who assesses the property on that day? Or partially a reflection of a buyer's market?

Any recent appraisal issues or insights from your market?