Boring Midwestern City that's not even a 3rd-tier tech hub. Other boring Southern city that's also not even a 3rd-tier tech hub. Buyers are having to take on the risk of having to cover any extra over appraisal in cash, consistently, while that used to be rare (and, yes, usually for "I am super invested, emotionally, in getting this particular house" reasons).

My unremarkable suburban house in a boring city that's been building housing constantly and extensively for the last 10 years, is up like 25% in value over the last 2 years. We thought, based on extensive experience in this market, that we were already paying a bubble-induced premium of 15-20% when we bought it (possibly no longer true—thanks inflation). WTF.

I think Inflation scares are a big part of it - at least it was for me.

If inflation is 8.5% and a mortgage is 3%, the bank is paying me to buy a more expensive house.

At the same time, If I hold and wait to buy, my savings are evaporating while the price goes higher.

I think the appraiser is doing you a favor by not appraising it for the contract price in this case. Why would you want to overpay for a house and have to cover the financing shortfall yourself? Especially in a market that traditionally has slow RE price appreciation.

Let the cash buyers suffer the losses. You'll thank yourself later.

You're assuming that the deal doesn't go through if it doesn't appraise.

In my market nearly all winning offers have waived the appraisal contingency

Not assuming that at all. I'm saying that if the appraisal doesn't go through, then the lender won't cover the remainder of the purchase price, and then the buyer will have to make up the difference out of his/her own pocket. At that point, I'd bail, because the appraiser is raising a red flag.

But since you mention it, in the slower market being discussed here, I would definitely not waive an appraisal contingency.

> At that point, I'd bail, because the appraiser is raising a red flag.

The point is, in a lot of markets, if you bailed on offers over this in the last couple years, you wouldn't be winning any bids in the first place, and wouldn't have been able to buy a house at all. The winning bids include guarantees that the buyer will cover the difference. If you won't do that, you'll lose to an all-cash offer from someone who will. If you're lucky, you won't be competing against superior offers that also waive all contingencies.

I have no idea where all these people are coming from with hundreds of thousands in cash and the ability to cover several thousand more on top of the appraisal value, but they seem to be involved in damn near every sale the last 2ish years. Given how many are OK waiving inspections and such, I have to assume they're institutional buyers who can spread that risk around, not individuals who could be ruined by that kind of thing.

Something seems a bit off, then, because if the market is appreciating, then the appraisers should be taking that into account. As another commenter said, they were certainly doing that in hot West Coast markets like SF and Seattle. Both houses I purchased (each in those locations) appraised at the contract price, and I bought them both within the last 7 years.

They do, but it lags. If prices are going up fast enough, given the way these things are determined, it can easily be the case that damn near every house isn't appraising at what it sells for.

The "solution" to this, in the run up to the '08 crisis, was for appraisers to "help out" by fudging their figure to make it match the sale price. I know this because a real estate agent whose husband was a loan officer, told me so. "I know they were just trying to help out with these new regulations, but it's had the unintended consequence that appraisers can't fudge their numbers slightly higher to match an offer that's only a couple percent above the natural appraisal, like they used to". LOL, yeah, the exact thing they were trying to accomplish was an "unintended consequence". Talk about not being able to understand something because your paycheck depends on it.

Possibly some appraisers in at least some markets have figured out ways around this, and are back to fudging numbers. I dunno.

It comes down to what the appraiser is really saying with their appraisal. Are they saying that in today's market this is what the house could go for or are they predicting the future value outside of a bubble

“Appraised at contract price” tells you how a bit about how grimy that process (that you’re paying for) is.

My appraiser (on a refi) was walking around the house with me and basically asked what I thought the place was worth. That was what it appraised for. (The contract price on an original sale has the same property: what the buyer thought it was worth.)

Ideally those are tethered, but the appraisals didn’t give me a great sense of independence.

If appraisals were arranged and paid for by lenders, I think appraisals would become a lot more honest. But most lenders these days will only perform due diligence to the extent Fannie Mae/Freddie Mac require (and they already have a lot of requirements, which is why the underwriting process is so maddening), so the onus is really on the backers to require appraisers have some sort of fiduciary duty to them.

Counterpoint: as home prices keep climbing, many of the kind of things that would be caught by a home inspection become less and less financially relevant. When you're buying a million dollar house, 20K for a new roof is in the noise

sure, the appraiser is always providing the buyer a service by giving them an accurate appraisal (more information is better).

If the buyer chooses to proceed, this can be a financial disadvantage reducing access to a highly leveraged loan.