Appraised Value VS Sold Value

6 Replies

Good morning Alabama experts,

I wanted your opinion on why the Appraised Value is so much higher than the Value that properties actually sell in Alabama (Calhoun County) ? In other states like Georgia it is mostly the opposite (Real Value higher than Appraised value.)

Thanks a lots

It depends on many factors. 

Maybe there are few comparable sales for a particular property in Calhoun property, so the adjustments need to be more extensive.  The ore adjustments an appraiser makes, the more likely error will creep in.

Maybe the lending market is smaller in Calhoun County, so appraisers generally appraise on the high side to be sure home purchases will be approved for lending.

Maybe your experiences are not representative of the market as a whole, but idiosyncratic.

Maybe the market is experiencing a slight down-turn, so that recent sales of comparable properties are too high.

Have you asked a local appraiser about this phenomenon?

You are probably correct about the small market in Calhoun county.

@Adrien Gael Without knowing the details, methodology and opinions of appraisers in the market, no one will be able to give you a definitive answer. @Denise Evans has done a great job in giving you ideas. 

IMO, the biggest reason for properties with higher appraised value than selling price in smaller counties is due to the volume of sales data available. Often times, the data is stale (old) or there are not enough comparables. Furthermore, in many smaller communities, prices have been inching downwards. It is not easy to sell your property because there are not enough buyers. Hence, a property's intrinsic value (appraised value) might be higher but its selling value will be lower as the buyer has all the power. 

Originally posted by @Adrien Gael :

Good morning Alabama experts,

I wanted your opinion on why the Appraised Value is so much higher than the Value that properties actually sell in Alabama (Calhoun County) ? In other states like Georgia it is mostly the opposite (Real Value higher than Appraised value.)

Thanks a lots

My advice: "If it ain't broke - don't fix it"! 

[ie. You always/mostly want it to appraise higher, right? Especially when it comes to Refi time!]

Lesson: So long as you know you won't be able to sell it at its appraised value, no problem...

Calhoun County is a smaller market. It's almost impossible to determine the external obsolescence, i.e., market reaction to the location. The appraised value in these markets are honestly best guesses most times since the sales and listing are few and far between. The distance to linkages, (employment, shopping, etc) has a major impact on the reaction of a market whether in Alabama or elsewhere. I appraised a couple in Calhoun County years ago for the VA and after a couple I gave it up because it was too difficult to get an accurate valuation. In most markets and neighborhoods you can establish a pattern but in markets like these it becomes completely subjective by using the extraction method. The best an appraiser can do in these markets is find a similar home in a different area within a reasonable distance to establish a baseline for the value set. Once you see what similar out of place homes sell for in other areas you can see the reaction the market gives to these types of homes and locations. Once you can see the list price to sales price ratio for the comps you can better determine the negative reaction of the market. If 3 comps average selling for 80% of the list price you know the likely sales price will be 80% +/- of current list price in the area. It's not like being in a patio home development where every house is the same so it truly comes down to the opinion of the appraiser plus the opinion of the buyer. Tax values in Alabama are never accurate. Residential taxes are a drain on local municipalities so they never decrease the assessment unless you contest the taxes, which is done often in Alabama. Municipalities only profit/break even from commercial property. If it's in an area where there is a lack of market activity always hit it at a minimum of 10%. I've appraised some before where I hit it 50% but that was Hale County and it was a fellow appraiser. He was not happy and reported me to the board. The board called and said good job. Rural areas hit it hard for external obsolescence.

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