If you are about to have an investment property appraised, be prepared to feel a little let down. According to the National Quicken Loans Home Price Perception Index, homeowners and appraisers are in discord over their home values for the fifth month in a row, and the gap is only widening. In fact, the difference between what property owners are sure their home is worth and what their appraisers are telling them it’s actually worth, is nearly two percent difference as of April 2017.
While having a low appraisal is certainly bad for morale, the bigger issue is that property owners may inadvertently mislead potential buyers who rely on the seller to give them an idea of price instead of pulling their own comps. “That single number can impact how much money a buyer needs to bring to closing or the equity that is available to the homeowner on refinance,” observed Bill Banfield, vice president of capital markets at Quicken Loans. He warned that the mortgage process will not necessarily be as smooth for buyers or sellers if property owners have significant misconceptions about their home’s value.
There are some areas of the country where your appraisal may still hold a pleasant surprise instead of an unpleasant one. In Denver, Dallas, Portland, Seattle, and San Francisco, appraised values are at least one percent higher than homeowners expect these days. In Denver, they are closer to three percent higher. If you’re getting an appraisal in Baltimore or Philadelphia, however, go ahead and rein in your expectations. Quicken reported that Philadelphia homeowners are overestimating their home values by an average of 3.37 percent.
Carole Ellis is the editor-in-chief of Think Realty Magazine. Learn more about the publication at https://thinkrealty.com/membership/