Why Can Two Appraisers Value the Same Property Differently?
It can be frustrating when two appraisers provide different valuations for the same property. But there are several factors that can explain these differences. For example, the timing of the appraisal is crucial. A property appraisal from several months ago may no longer be accurate due to market shifts or economic changes. Always check the effective date of an appraisal, especially if it’s from an estate or pre-sale process.
The purpose of the appraisal also matters. If one appraisal is for insurance purposes and another is to determine market value, the numbers can differ greatly. Insurance appraisals typically focus on the replacement cost, not the market value. Other types of appraisals, like for retrospective value or liquidation value, are intended for specific circumstances and won’t reflect the property’s current value in today’s market.
The appraisers may also have used different comparable sales in their evaluations. If one appraiser chooses properties more similar to the one being valued, their estimate may be closer to the actual market value. Another appraiser might use less relevant comparisons, leading to a significant difference in valuation. Also, adjustments to comparable sales, such as for extra acreage or features, can vary between appraisers based on their interpretation of market demand. Even the way these adjustments are applied—like if one appraiser adjusts for a feature twice—can create disparities in the final valuation.
In cases where there is a significant gap between appraisals, lenders may even request a reconsideration of value (ROV) to address potential errors or biases.
If you’re buying or selling a home, understanding appraisals is crucial to getting the best deal. As an experienced realtor, I can guide you through the process and help ensure you get an accurate valuation for your property. Contact me today to get started, and follow me for more real estate insights and tips!
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