Have you ever seen two appraisals for the same property come back with significantly different values? If so, you’re not alone. It’s one of the most common frustrations for both buyers and sellers in the real estate market. But before jumping to conclusions, it’s important to understand the reasons behind these discrepancies. Here are some key factors that can cause two appraisers to value the same property differently.
1. Timing of the Appraisal
Real estate markets are constantly changing, and the value of a property can fluctuate based on the timing of the appraisal. For example, if one appraisal was done six months ago and the other is done today, even subtle changes in the market could lead to a difference in property value. In volatile markets, this gap can be even more pronounced, with values shifting significantly over a short period of time.
2. Purpose of the Appraisal
Not all appraisals are meant for the same purpose. One might be done for refinancing, while another might be for the sale of the property. The intended purpose can influence the appraiser’s approach to the property’s value. For instance, appraisals done for insurance purposes often calculate the “replacement cost” of the property, which may not align with its current market value. Knowing the purpose behind an appraisal can help you better understand why values might differ.
3. Choice of Comparable Sales
Appraisers often rely on comparable sales (comps) in the area to determine the value of a property. However, each appraiser might choose different properties to compare, leading to different results. If one appraiser selects properties with slightly higher values or in better condition, the valuation could skew upwards. Another appraiser might choose properties that are more similar in condition to the subject property, resulting in a lower valuation.
What You Can Do About It
When faced with two different appraisals, ask to review both reports and understand the comps they used. It’s also wise to consult with your real estate agent, who can provide insight into the local market and help explain any discrepancies.
By understanding these factors, you’ll be better equipped to handle differing appraisals, giving you the confidence to move forward in your transaction.