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Are There Big Differences Between House Prices and Appraisals?

differences between house prices and appraisals

Are you thinking of selling your home and wondering what it is worth? Have you heard that there can be a big differences between house prices and appraisals? Let’s take a look at why this can be the case and what you can do to find out the true value of your home.

Yes, there can be big differences between what a house is appraised for and its actual market value.

It’s important to remember that the appraised value of your house is not always the same as its market value. An appraisal looks at the estimated worth of a house based on factors like condition, neighborhood values and features. But differences between what a property is appraised for and its actual market value could be caused by fluctuations in the local market or differences between seller and buyer expectations. Knowing both aspects can provide helpful insight when determining the best deal.

The growth in appraised values has not kept pace with growth in house prices

The appreciation of house prices has been a cause for concern in recent years. The rate at which values have increased is far outstripping that of appraised values. This issue has become more pressing as many potential buyers are now being priced out of the market. This can lead to a decrease in demand and therefore lower house prices. The disparity between appraised and actual values is causing people to rethink their decisions when it comes buying property, with many choosing to rent instead.

What does the Federal Housing Finance Agency say about the problem?

In the past few years, since the outbreak of the COVID-19 pandemic, there has been a tremendous and sudden increase in house prices. As a result, appraisers have found it difficult to keep up with these rapid price fluctuations. Accurately calculating the current value of a home becomes an increasingly daunting task. Past value changes are relatively irrelevant in the current market.

The Federal Housing Finance Agency follows these developments closely. Here is their recent take on the differences between house prices and appraisals:

“Rather than house prices driving future appraisal values, our findings suggest that on a national basis, appraisal values reflect the past values of home prices. Additionally, we see that appraisal values tend not to adjust up or down as much as house price measures.”

Here’s a chart from the FHFA illustrating the problem. The red dotted line is the median appraised value. The actual purchase price is the solid blue line.


median appraised value vs. sale price chart


Remember, appraisals are based on many factors

Some appraisals are an important part of the home buying process, and it’s essential to get a good one! An appraisal can differ from the house price in many cases, as it is based on several factors – such as location, square footage, age of the home, and recent comparable sales in the area. Understanding these differences can help buyers budget for their new homes accordingly. Appraisals are a crucial element in being able to secure financing, so having a thorough understanding of both the house price and appraised value is important.

If you’re thinking of selling your home, get an accurate estimate of its worth so you can price it right.

Before selling your house, it is important to determine an accurate estimate of its worth. The best way of doing this is by getting a professional appraisal, as this will ensure you get the highest price possible. It’s also advantageous to acquire other opinions from local realtors, since they will have a better understanding of differences between house prices and appraisals. A basic estimate can often be obtained for free. However, getting a more accurate assessment of your home’s value does require some investment in terms of time and money; so it pays to weigh up the potential return before deciding if it’s worth it in your case.

In summary, it’s important to remember that a home’s appraised value is not always the same as its market value. Appraisals are based on objective factors such as location and square footage, but market value also takes into account things like buyer demand and seller motivation. If you’re thinking of selling your home, it’s crucial to get an accurate estimate of its worth so you can price it competitively and avoid leaving money on the table. Do you have any insights into how appraisal values differ from market values in your area? Let us know in the comments below!

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