Working in the South Florida real estate market right now is like being thrust into warp speed. Properties are selling lightning fast, and prices are light years ahead of what anyone could have predicted. As someone who assists clients daily on what feels like a race to space (trying to find their own space to call home!), I’m here to tell you, 2022 is blasting into another universe. One of the many indicators of this rocket-like momentum is the fact that appraisals can’t keep up in a few weeks’ time frame.
Typically, when you buy a home with financing, the bank orders an appraisal on the home. An appraiser analyzes the home and recent sales to use as comparables. These comparables include only sales that have taken place in the last six months. That used to be a very reasonable period to compare your sale to. But by today’s standards, a home that closed even three to six months ago closed in a very different market — a lower market! A home that went under contract in early December and is scheduled to close in February has seen an increase in value before they even reach the closing table. Now that sounds like a wise investment.
I saw it happen firsthand. I had a listing in south Coconut Grove that I sold to my buyer for $1,775,000 and closed in June 2021. The job situation changed for my buyers, and they came back to me needing to sell the home before 2021 was over. And guess what? We sold it for 12% MORE and closed in December 2021. A 12% return on investment in six months? That’s a game changer.
So, as a buyer in this market, keep in mind that you may have to pay over asking price to get a home. Another common practice buyers are having to use is adding a clause that says you are willing to pay a certain amount over appraised value. This would mean a buyer has to have additional cash to make up the difference between appraised value and the agreed-to purchase price, or they need to restructure their loan altogether. This is becoming more and more the norm because of the steep increases in values.
Miami is on the rise with no slowdown in sight. We are seeing a huge influx of companies and people relocating to our sunny city. Miami is the second-fastest city in America in company formation, according to the U.S. Census Bureau. With our historically low inventory (less than one month’s supply in most neighborhoods, where six months’ supply marks a healthy market), prices continue to rise … even if in years past this trajectory would have seemed out of this world.