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Gap Between Homeowner’s & Appraiser’s Opinions Widen

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Gap Between Homeowner’s & Appraiser’s Opinions Widen | Keeping Current Matters

In today’s housing market, where supply is very low and demand is very high, home values are increasing rapidly. One major challenge in such a market is the bank appraisal.

If prices are surging, it is difficult for appraisers to find adequate, comparable sales (similar houses in the neighborhood that closed recently) to defend the price when performing the appraisal for the bank.

Every month, Quicken Loans measures the disparity between what a homeowner believes their house is worth as compared to an appraiser’s evaluation in their Home Price Perception Index (HPPI). Here is a chart showing that difference for each of the last 12 months.

Gap Between Homeowner’s & Appraiser’s Opinions Widen | Keeping Current Matters

The gap between the homeowner vs. appraiser’s opinion had been heading in the right direction (closer to even), until this past month, when the gap widened again to -1.99%.

Bottom Line 

Every house on the market has to be sold twice; once to a prospective buyer and then to the bank (through the bank’s appraisal). With escalating prices, the second sale might be even more difficult than the first. If you are planning on entering the housing market this year, meet with an experienced professional who can guide you through this, and any other, obstacle that may arise.

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6 Responses to “Gap Between Homeowner’s & Appraiser’s Opinions Widen”

  1. Jack March 19, 2016 at 1:59 pm # Reply

    The appraisal system is broken. Although there are many issues. One change that would help is to allow appraisers to use homes built under the following scenario as comparative ( aka comps) sales : an individual buys a lot then obtains a loan for the construction of a home on the lot. Currently, appraisal guidelines prohibit using this ” assembled sale” as a comp. A huge portion of the custom and rural new home sales are not eligible for use as a comp because of this guideline.
    Also, the appraisal process needs to do away with fairly recent changes that make it likely that your appraisal will be done not by an appraiser with detailed local knowledge, but by an appraiser that is randomly assigned by a management company.

    • Brian March 22, 2016 at 1:27 pm # Reply

      They do not meet the definition of a market sale and are not and never will be used as they would serve to artificially inflate market values even more than they are now.

    • Donna March 22, 2016 at 5:29 pm # Reply

      Right On Jack. You know your business. Too bad those that make the rules know nothing about the business.

    • William Cenci March 23, 2016 at 9:41 pm # Reply

      Every case has a ” but on the other side”. I get to review several appraisals and I find the appraiser of choice is the one who “gets the deal done” . Often in my market if you give your opinion which is honest and unbiased the realtors want to use someone else who won’t kill a deal. The appraiser chosen off a approved list of appraisers can do their job and appraise versus meeting the predetermined target. I see several appraisals hit the number by the local until it’s reviewed and they didn’t use this sale or that sale and just forgot the basement was 100% finished. It always seems the correct way to select appraisers is if you happen to be the one getting chosen is a good thing.

  2. Korina Chinchen March 27, 2016 at 9:20 am # Reply

    The home owners are not the professionals, nor are the realtors in this matter, the appraisers are. This is a career that everyone thinks they can do. The appraiser is challenged constantly by everyone involved in the process. Rules and regulations by the federal and local governments are fierce. The educational and mentorship requirements in my state are vast, and very few are now entering the field. More regulations were placed on appraisers and lenders after the last crash, now there are AMC that add to the process costing the consumer and the appraiser money. In my opinion it is the realtor that needs more education and licensing restrictions/requirements to accurately inform the buyer/seller. It is easier to get a license to sell real easte than any other professional license. Unskilled realtor’s inflate the market and I guarantee there will be another crash.

  3. Rachel July 6, 2016 at 1:39 pm # Reply

    Your point that every house has to be sold twice is so true. It’s definitely something to consider when you are selling your home. Thanks for sharing.

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