People tend to think that appraisals give the absolute, god-given value of a home.
That is SO wrong.
Appraisals are just one knowledgeable person’s OPINION of value and two different appraisers can have VERY different opinions of value.
For example, a friend from Washington D.C. recently sold a condo to his long-term tenant. The agreement with the tenant was that they each get an appraisal and split the difference to determine the sale price.
The two appraisals were off by $40,000! That’s huge.
Guess which appraisal come in low. Yep, the tenant’s.
The seller’s appraiser only used comps in the same building while the tenant’s appraiser only used comps in other nearby buildings!
The tenant’s appraiser clearly gamed the system by choosing less comparable but cheaper comps to make his client happy.
I’m sure his client, the tenant, was very happy because the low appraisal was worth $20,000 to her.
Takeaway
Appraisals are sometimes very wrong.