Appraisal discrepancies can be stressful, especially when you’re in the middle of a real estate transaction. Imagine this: you’ve agreed on a sale price, but the appraisal comes back lower than expected, or worse, two different appraisers return completely different values for the same property. How do you make sense of this, and what can you do about it? Here’s what you need to know about navigating appraisal discrepancies.
Understanding Appraisal Discrepancies
First, it’s important to understand that no two appraisers work the same way. Each appraiser has their own set of criteria and methods for evaluating a property. These differences can lead to varied results, even when the same property is appraised by multiple people. Market volatility, property conditions, and the comparables used all play a role in shaping the final valuation.
What Causes Differences in Appraisals?
One major cause is the selection of comparables. Appraisers rely on recent sales of similar properties (comps) to estimate a property’s value. However, not all comparables are created equal. An appraiser might choose comps that reflect higher or lower prices depending on location, upgrades, or property condition. Additionally, the appraiser’s interpretation of a property’s unique features can impact how they adjust the comps they use.
The timing of the appraisal also matters. In rapidly changing markets, even a few weeks can make a difference in property values, particularly in competitive areas.
Steps You Can Take
If you encounter two different appraisals with varying values, don’t panic. Start by reviewing both appraisals carefully. Look at the comps they used, check the condition of the properties compared, and see if there are any major differences. It may also help to ask your real estate agent to review the appraisals and provide guidance.
If you feel one appraisal is inaccurate, you can request a reconsideration of value (ROV). This involves presenting new information or comparable sales that the appraiser may have overlooked.
Ultimately, appraisals are not an exact science, but by understanding the factors that cause discrepancies, you can confidently navigate the process and ensure a fair valuation.