I’ve had a few appraisals come in low the past couple weeks, and both times the buyers chose to back out of the deal. While this certainly happens from time to time, and is part of the real estate process, there are some things to keep in mind when talking about appraisals.
As the video points out, appraisals are not fact. Rather, they are the opinion of one individual appraiser. While you would expect most appraisers to agree and come to the same value on a property, they don’t. This is because some appraisers and more knowledgeable and competent than others. We see this issue a lot in Big Bear. Appraisers come up from out of the area with a general knowledge of the area but not a true understanding of what makes one property different from another. Just because two properties have the same number of beds, baths, and square footage does not make exact comps. The more knowledgeable the appraiser is with the local Big Bear real estate market, the more accurate the appraisal will be.
Appraisal value is not the same are market value: the price a buyer is willing to pay. Appraisers have to follow certain guidelines when doing a property appraisal – they can only go back a certain amount of time back for comparable sales, which is typically 3 months; only a certain distance away, typically a mile; within a certain year built; and within a certain size range. Appraisals are for the benefit of the buyer and the buyer’s lender. That’s the key point. If the appraisal comes in low, the loan can be tougher to get or the buyer may have to put in more money for their downpayment. Buyers, for the most part, don’t care and don’t really understand the appraisal. As long as the property meets their needs and the price seems in line, they are willing to pay the price.
In the end, appraisals are only as good as the person doing them. Just like anything, mistakes can be made so be sure to review them and don’t be afraid to question the accuracy and provide evidence to dispute the value.