Different Kinds of Appraisals
Appraisals of home value can vary widely because there are many different kinds of appraisals. We are taking a look at the different purposes for which appraisals are initiated and discuss this causes appraisals to vary widely in economic value.
If you have an appraisal from a lender, you have not been given the market price of your home; you have been given the upper limit of the lender’s willingness to loan you money.
In particular, lenders have been overly generous in valuing homes for the purpose of making equity lines of credit. Lenders use different kinds of appraisals from those used by real estate appraisers who are valuing a home for sale.
These appraisals are not measures of what the market says a buyer is willing to pay for your home.
They instead reflect the risk a lender is willing to consider when underwriting your loan.
MARKET VALUE APPRAISAL
If you instruct a qualified appraiser to predict the price your home will sell for in the next sixty days, you will obtain a pretty good estimate of what your home will yield on the market.
But, if you have an outdated (older than 30 days), second party appraisal (i.e. bank, estate, tax, insurance) used for an entirely different purpose; you do not have an accurate prediction for the market value of your home.
Insurance values can be misleading indicators of a home’s true market worth.
Insurance companies have a vested interest in making sure you can replace your home in the event of a fire or other disaster.
The recommended insurance value of your home almost always exceeds the market valuation of your home and is just one of several different kinds of appraisals we have discussed. The Antiques Road Show on PBS cracks me up when they give owners of antiques two different values for their family heirloom. In reality, they are building in anticipated future appreciation when they assign a higher value for “insurance purposes” than for the antique “at auction.”
TAX ASSESSORS APPRAISAL
The tax office is also a poor source for the market value of your home. Despite an admirable effort to individualize the appraisal of your home for tax purposes, tax appraisers are looking at a huge database and have a limited amount of time when they assign a valuation to your home.
In my experience, tax valuations in metro Atlanta counties have – for the most part – been below the actual market value of the home. This is not 100% true, as I often receive requests from homeowners challenging an inflated valuation of their home by the tax office. In the present market with rampant foreclosures the exceptions have become almost a “norm”.
Different kinds of appraisals vary greatly in the price projected because they are created for different purposes and at different points in time.
If you are thinking about putting your house on the market, call Sally English 404-229-2995. Sally offers a FREE market analysis of your home and can help you predict a good list price by comparing other homes in the neighborhood that have recently sold.