Transaction Series
Why Appraisals are Different on Same Property?
Reviewed by Stephen Lee with CRI
Property Value
– Market Value
– Market Price
Price Estimation
– Zillow
– NARRPR.COM
– Agent’s CMA : Comparable(s) via Adjustments
Tax Ratio Method
– Appraisal by Appraiser
One of the most frustrating things for consumers, agents and even appraisers
involved in a real estate transaction is seeing disparate results in two or more appraisals of a property.
Estimated Value Isn’t Always Market Value
- Timing Factor
-Check the date of the appraisals
-Outdated/Sudden economic shift/natural disater, etc.
-Effective date and Inspected date can be different for the estate
- Use of a property
-Appraiser must specify:
1)Check the intended use
2)Intended user and type
3)Definition of value
- EX) For the case of Intended use is for “Insurance purpose”
and Definition of value is “replacement cost of improvement” ,
the appraisal is not valid for establishing an asking price to sell the property
- Consider the highest and best use
-Requires an appraiser to determine the one use of a property
1) physically possible
2) legally permissible
3) financially feasible
4) maximally productive
- EX) For the case of Intended use is for “Insurance purpose”
and Definition of value is “replacement cost of improvement” ,
the appraisal is not valid for establishing an asking price to sell the property
Reconciling Differences of Opinion
Lender can do ROV(Reconciling Of Value) since July 2024
- Issue with Comparable selection
– non-arm’s length transaction
– Stigma effected
– Condition issues affected the value, but didn’t show up in exterior images.
- Review adjustment details
– Adjustment was based on market reaction
– Or, based on the cost of adding one
Gross and Net Adjustments
- Adjusted -$5000 for out-of-date kitchen, but +$2000 for having more useable land
– Gross adjustment à $7000
– Net adjustment à -$3000
- Sales price is $100,000
– Gross adjustment à 7%
– Net adjustment à -3%
– Lower gross and net adjustment could indicate that comparable
sale is more similar to the subject property
– Also it could indicate that sale was underadjusted.
