Appraised Value vs Selling Price
by Darren Ryals, Certified General Real Estate Appraiser
May 2023
Sometimes there can be a difference between the listed/selling price and the appraised value of a property. Why is this? There are several variables that can apply.
Why could a sale price appear high?
In a market that is moving upward, the listed/selling price or even recent auction prices may be leading to ever increasing highs. Meanwhile, an appraiser is working with sales data that has already happened. For this reason, these professionals face opposing challenges. A real estate agent or auctioneer wants to maximize the sale price for their client. A real estate appraiser wants to find the most recent sales that are truly comparable to the subject property.
Other examples of a strong asking price could be:
The seller may not be very motivated to sell the property quickly and chooses to “test the waters” with what appears to be a strong asking price. If the market keeps moving upward, then eventually the asking price will look like a good deal to a potential buyer. Alternatively, the seller may be in a partnership with other owners and wanting out. As a result, the asking price may be higher than what market sales support.
Why could the sale price appear low?
An example of what may appear to be a low sale price could be a private sale between the current owners and a family member or even to a long-term tenant. In this situation, the sellers may be more interested in helping someone out or choosing who the next caretaker of the land or property will be, rather than trying to maximize the sale price.
Why could the sale price appear to be a fair value?
Many times, a selling price appears to be within the range of values indicated by recent similar sales within a particular market area, so it may be that the appraised value ends up being the same or very close to the selling price. There are many more variables that could come into play such as condition of the property, location, interest rates, availability of credit, livestock or crop prices, potential rental income, exposure to the market, marketing, etc. There are many things that could affect a sale price, and the above examples are by no means all-inclusive.
At the end of the day, one high sale or one low sale does not make the market. The more data available for comparison with a subject property, the more confidently can a case be made for what that property is worth. At Spurgeon Appraisals,we go to great lengths to have as much sale data as possible. Even though not every sale is available to us, so we use the best data available. Emails us today for your appraisal needs.
