“I want to know what my home is worth. I had it appraised for $1,200,000 in June. Aren’t appraisers usually conservative?”
One of the longest-running myths in the history of real estate is that appraisals are usually conservative, meaning below the actual value.
I can tell you from repeated personal experience that, on average, residential appraisals that are done for a refinance or other purpose (not a sale) tend to be above value, typically around 3%.
(Note: Do NOT look at your appraisal and subtract 3% and think that’s the value. 3% is merely an average—yours may vary.)
Why does this “conservative appraisals” myth persist?
Here’s my theory, a three-parter:
Part A: In a rapidly rising market as we’ve had for long stretches in the past few decades, some home appraisals may come in low because the appraiser may not be factoring in how quickly the market has risen.
Part B: In a rapidly rising market, an appraisal you had done in January may well be below what the value is several months later.
Part C: When an appraisal in a home purchase comes in low, everyone hears about it because it causes problems and can kill the sale. But when an appraisal comes in high, no one usually hears about it.
Hope that puts the myth to rest…