When it comes to real estate transactions, appraisals play a critical role in determining property value. But what happens when two appraisers return different values for the same property? It can feel confusing and even frustrating, but there are specific reasons why these differences occur. Let’s take a closer look at three key factors that influence appraisal values: timing, the type of value being appraised, and the selection of comparable sales.
1. Timing of the Appraisal
The timing of the appraisal can have a significant impact on the final valuation. In fast-moving markets, property values can change quickly, and what was accurate a few months ago might no longer apply. If one appraisal was completed during a market peak, while another was done during a market dip, this could explain the difference in values.
Additionally, economic events such as interest rate changes or shifts in buyer demand can cause fluctuations. When reviewing appraisals, always check the date of the valuation to ensure it reflects the current market conditions.
2. Purpose of the Appraisal
Not all appraisals are intended for the same purpose. Some might be done for insurance, refinancing, or selling. For example, an insurance appraisal focuses on the cost to rebuild the home, not its market value, leading to a different number. When comparing two appraisals, understanding the intended use can help explain any discrepancies.
3. Choice of Comparable Sales
Appraisers use comparable sales (comps) to help estimate the value of a property. However, different appraisers may choose different comps based on availability or interpretation of the property’s characteristics. One appraiser might focus on comps that are more updated or in better condition, while another might use more similar, lower-value properties.
How to Handle Different Appraisals
When you receive differing appraisals, start by reviewing the comps used in each report. Are the properties comparable in terms of size, location, and condition? If one appraisal seems off, you can request a reconsideration of value by presenting better or more accurate comps.
By staying informed about these key factors, you’ll be able to navigate appraisal differences with confidence and make well-informed decisions in your real estate transactions.