Why Do Appraisers and Homeowners Differ on Values?

Although appraisers are dedicated to developing credible and reliable opinions of value, many homeowners often have unrealistic expectations of what their property is worth. Why does this discrepancy exist?

First, homeowners should remember that appraisers don’t set the market; they reflect what’s happening in the market. Appraisers are particularly valuable because they are an objective and unbiased source of real estate information. Unlike some other real estate professionals, appraisers perform a professional service for a flat fee – rather than for a commission contingent on the value conclusion, the approval of a loan or the eventual sale of the property.

ConfusedHousing_4298041While the difference between appraiser and homeowner opinions of home value is declining, January marked the 12th straight month in which homeowners’ estimates were higher than appraisers’.

It’s also important to know that appraisals completed for mortgage transactions are used to assist lenders in making lending decisions. But buyers and sellers often have emotional value attached to a home or are unaware of the market. They shouldn’t assume an appraisal is somehow “wrong” if it doesn’t match the listing or contract price.

There’s also no reason to assume the contract price is the “correct” price simply because it’s higher than the appraisal. Also, property value is determined by a number of factors, including location, condition, improvements, amenities and market trends … all of which can be analyzed by experienced valuation professionals, such as Designated Members of the Appraisal Institute. However, property owners do have the right to accompany the appraiser, and if necessary, to challenge the appraisal.

Homeowners are encouraged to learn key information about appraisers and appraisals in order to help them effectively navigate the appraisal process.

Appraisers, share your other tips for homeowners.