5 Reasons Why Your House Didn't Appraise For What You Thought it Should

By
Real Estate Appraiser with Thomas Horn, Real Estate Appraiser

Why didn't my home appraise for what I thougt it would?Have you ever gotten an appraisal back on your home for a refinance (or sale) and found that it did not appraise for what you thought it should?  Unfortunately this does occur on occasion.  You may chuckle and say this occurs more times than not and you may think the appraiser is just a "deal killer", however you must realize that appraisals are based on actual market data and not a spin of the appraisal "value" wheel.  Please don't blame us, we don't make the market, we just report it.  Most people don't understand how we arrive at a value so I thought I would fill you in on some of the top reason where there could be confusion on what you think your house should be worth.  So here are some top reasons why your house may not have appraised for what you thought it should, drum roll please:

  1. Bad real estate market- As you probably are already aware, the real estate market in most areas is down.  You may not be unaware of how much depreciation is occurring in  your area.  The large number of foreclosures and short sales is affecting "normal" properties; this is unfortunate but a reality in today's market.  We are likely to see this continue until the inventory of foreclosed properties is depleted.
  2. Cost does not equal value- This is a common problem with homeowners who have invested a lot of money in improvements and renovations.  In a previous post I noted a website that will give you an estimate of how much of a return on your investment you could expect on some common home projects.  Just because you spend $50,000 on home improvements does not mean your homes value will increase by that amount.  It could be more, less, or the same.
  3. Your neighbor did not tell you the truth- I had a client one time that was selling their home themselves.  They had priced their  home based on what their neighbor (who recently sold their home and moved) had supposedly sold theirs for.  The neighbor exaggerated a little and said he had sold his home for around $15,000 more than he actually did.  My client figured that since their home was very similar to the neighbors they would list theirs for a similar amount.  Because it was overpriced my client could not sell their home, which is why they called me.  Always verify through public records before you take someone for their word.
  4. Tax assessment is wrong- In some areas the tax assessors have not revalued your property recently, so its tax assessment is based on old sales from several years ago, when prices were higher.  It is not a good idea to estimate your homes value based on its tax assessment.  In addition, you could be overpaying in property taxes.
  5. The real estate appraiser may not know your market- Last year a law went into affect that regulated how mortgage companies could order appraisals.  Because of some confusion, most lenders are utilizing third party "Appraisal Management Companies" (AMC's).  Some of these AMC's use fee as a main criteria in choosing an appraiser.  The appraiser the AMC is using may be from out of the area and not know your market.  It is always a good idea to ask the appraiser where they are from, how long they have been appraising (ie: experience), and if they have any experience doing appraisals in your neighborhood.

These are by no means the only reasons your  house may not have appraised for what you thought it should.  If I can answer any of your questions please give me a call and I will be glad to help.  I can be reached at 205.243.9304.

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Re-Bloggged 8 times:

Re-Blogged By Re-Blogged At
  1. Linda Jamail Marshall 01/15/2012 11:04 AM
  2. Monika McGillicuddy 01/15/2012 11:05 AM
  3. Charita Cadenhead 05/08/2012 06:24 AM
  4. Eric Michael 05/08/2012 04:27 PM
  5. Cheryl Ritchie 05/09/2012 01:34 AM
  6. Lenn Harley 05/09/2012 03:54 AM
  7. Richard D. Ferris 05/17/2012 03:34 PM
  8. Gabe Sanders 05/21/2012 03:59 AM
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Topic:
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birmingham alabama real estate apprai
geographic competency
cost and value
bad appraisals
low property values
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Rainmaker
37,014
Tom Horn
Appraising The American Dream
Thomas Horn, Real Estate Appraiser

That is a big misconception  Gregg.  You are right, it all depends on what the local market is willing to pay.

May 11, 2012 05:58 AM
Rainmaker
67,211
Richard D. Ferris
Florida State Certified (FHA) Appraiser
AmcAppraisalsinc.com

Great article Tom!  I'm gonna reblog this one I think!!

May 17, 2012 03:32 PM
Rainmaker
37,014
Tom Horn
Appraising The American Dream
Thomas Horn, Real Estate Appraiser

Thanks Richard.

May 17, 2012 03:50 PM
Rainmaker
405,036
Beth Atalay
Cam Realty of Clermont FL
Cam Realty and Property Management

Tom, Great Post. I've wondered why an Appraiser would use only low end or high end comps to drive at a certain value!! I say "drive to certain value" only because, we all know most markets are REO and Short Sale driven and Standard Sales almost always higher than distressed sales. If comps used are a mixture of distressed and FMV, you will have a fairly realistic value vs using only distressed sales or only FMV. Also, where there are comps in the immediate area that are similar to subject, why would an appraiser expand their search 5 miles to pull comps?

 

June 01, 2012 07:24 AM
Rainmaker
37,014
Tom Horn
Appraising The American Dream
Thomas Horn, Real Estate Appraiser

Thanks Beth for your comments.  Appraisers typically use the particular sales that are predominant in a market because it is reflective of what is going on.  Like you said, if a market has a lot of homes that have sold REO or short sale, AND there are still similar homes in inventory then yes that is what is going to be used.  Active and pending sales are very important to appraisers because those sales are the most recent.  I hate to say it but if an appraiser is going 5 miles away when there are legitimate, recently closed COMPRABLE sales within the neightborhood, there might be a competency issue as it sounds like they might be trying to make the value something it is not.

June 01, 2012 10:23 AM
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Rainmaker
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Tom Horn

Appraising The American Dream
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Additional Information

Author Bio: Tom Horn lives in the Birmingham, Alabama area with his wife and two children. He has been appraising residential real estate for over 20 years and holds the SRA designation from the Appraisal Institute. He concentrates in the area of single family, vacant land, 2-4 family, and condominium appraisals.

This blog discusses Birmingham Alabama real estate appraiser topics in real estate appraisal. This includes but not limited to topics including explanations of the real estate appraisal process, articles on fsbo marketing appraisals, current topics in the appraisal profession, the real estate market in the Birmingham, Alabama area, appraisal humor, and the general real estate market.