Why Some Homes Appraise High and Others Do Not
Scott P. Rogers
In an ideal world, a home's appraisal would match the price a buyer is paying. But in reality? That's not always the case -- and it often comes down to the condition of the home and how that's interpreted differently by buyers and appraisers.
Here are two common examples:
When a Home Appraises Higher Than the Contract Price
Think of a large home -- say 3,000 square feet -- that needs new flooring, paint, and kitchen/bath updates. Buyers may offer less because of the visible work required.
But the appraiser? They're often comparing it to other large homes, and while they'll make some adjustments for condition, they may not fully account for the what the buyer considered to be an outdated feel. The result? The appraisal might come in higher than the sale price.
When a Home Appraises Lower Than the Contract Price
Now picture a smaller home -- maybe 1,500 square feet -- that's been fully renovated with top-of-the-line finishes, a new roof, new HVAC system and more. Buyers may fall in love and be willing to offer a high price for the home because it feels move-in ready.
But the appraiser still has to work within comparable sales, and size is a major factor. Even with condition adjustments, the appraisal might land lower than the contract price.
The Bottom Line
Appraisals do not always point to the price a buyer will be willing to pay for a home. They don't always capture how buyers feel about a home -- especially when it comes to updates, aesthetics, or deferred maintenance.
We'll talk about this more when we are preparing to sell your current home... or when we are talking about that home on which you might make an offer.
Here are two common examples:
When a Home Appraises Higher Than the Contract Price
Think of a large home -- say 3,000 square feet -- that needs new flooring, paint, and kitchen/bath updates. Buyers may offer less because of the visible work required.
But the appraiser? They're often comparing it to other large homes, and while they'll make some adjustments for condition, they may not fully account for the what the buyer considered to be an outdated feel. The result? The appraisal might come in higher than the sale price.
When a Home Appraises Lower Than the Contract Price
Now picture a smaller home -- maybe 1,500 square feet -- that's been fully renovated with top-of-the-line finishes, a new roof, new HVAC system and more. Buyers may fall in love and be willing to offer a high price for the home because it feels move-in ready.
But the appraiser still has to work within comparable sales, and size is a major factor. Even with condition adjustments, the appraisal might land lower than the contract price.
The Bottom Line
Appraisals do not always point to the price a buyer will be willing to pay for a home. They don't always capture how buyers feel about a home -- especially when it comes to updates, aesthetics, or deferred maintenance.
We'll talk about this more when we are preparing to sell your current home... or when we are talking about that home on which you might make an offer.
