Why sellers sell for below appraised value?

Question

I'm learning how to fix & flip homes, and I've noticed cases when properties are listed on the MLS for below the appraised value of the property (or so they claim). In the current market, it seems that appraisers are much more conservative about their estimates than they once were. I can understand that a highly motivated seller might be willing to discount the price below (perhaps significantly below) the value set by an appraisal, but I don't have enough experience to understand how often this is really the reason.

Are there any hidden "gotchas" to beware of when investigating a property that has a listing price that is significantly below the appraised value?

Chris Mason · Answer

I'm guessing you are conflating tax assessor value with appraised value, since that's what you can see publicly.

Property tax assessments have little to do with market value. It's just a gov't number. The gov't also thinks pizza is a serving of vegetable since it has tomato sauce. Not credible.

Russell Brazil · Answer

Appraised value may or may not have a correlation to the actual market value of the property

Jaron Walling · Answer

The house is only worth what someone is willing to pay. Everything is for sale and negotiable.

James Mc Ree · Answer

Your appraisal will often be for a little more than the selling price.  Lenders often require the property "to appraise" to establish the value of the property and the LTV ratio.  You have a mortgage application issue if you borrow 75% LTV against the selling price, but the appraisal comes in lower than the selling price.

Don't get too excited if your appraisal is over the selling price.  The market sets the price, not the appraiser.  Think of the appraisal as more of a ceiling on the value of your property at a point in time.  You can get a higher price with a cash sale, but it is harder with a lender involved.

Michael Noto · Answer

@Devin Bost what a property appraisers for is a lot different than what it will sell for on the open market in a lot of cases. Are you working with an agent? A good one should be able to tell you how this factor correlates in your market.

Dean Letfus · Answer

If you mean an appraiser has appraised the property then that value should be in the ballpark of sale price although often it isn't. Who knows why. IF you mean tax appraisal that has zip to dow with market value. You ultimately need to learn what houses are worth in the areas you're buying in.

Taylor L. · Answer

They might be distressed and need to sell quickly. The property might not actually sell at whatever the appraisal might be. Appraisers aren't buyers, buyers are buyers. I'm not sure I've ever experienced a seller having had their own appraisal done. Do you mean tax assessment maybe?

My observations have been the opposite, at least on the commercial side. Appraisals and valuation opinions go up and up.

Why sellers sell for below appraised value?

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