Homeowners, Appraisers Don’t See Eye to Eye on Home Values

The difference between appraiser and homeowner perceptions continued to widen for the fourth consecutive month in May, new research shows.

Appraiser opinions of home values were 1.15% lower than homeowner estimates, according to Quicken Loans’ national Home Price Perception Index (HPPI). This marks the first time in 22 months appraisal opinions were lower than homeowner estimates by at least 1%, data show.

The gap in perceptions between appraisers and homeowners isn’t surprising, Certified Reverse Mortgage Professional Beth Paterson, executive vice president of Reverse Mortgages SIDAC, tells RMD.

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“Generally, homeowners have always thought their homes are worth more than they are,” Paterson says. “Homeowners are usually emotionally attached to their homes, and seniors have often lived in them for so long. They’re proud of their homes.”

On the flip side, appraisers tend to be more “conservative,” she says, noting that appraisers also have specific guidelines to follow when assessing a home’s value. In April, the national index showed appraiser opinions were 0.69% lower than homeowner estimates, data show.

But both homeowners and appraisers have reason to be optimistic. 

Home values continued to steadily climb nationally, and in many regions of the country, according to Quicken Loans. The national Home Value Index (HVI) increased 0.24% in May from its April level, and rose 4.64% since the previous May, data show.

Despite the widening perception gap at the national level, appraiser opinions remain higher in the majority of the metro areas examined, the retail mortgage lender says.

“The HPPI, more than anything, is a reminder that there is no such thing as a national housing market,” says Quicken Loans Chief Economist Bob Walters, in a statement. “Every city, and every neighborhood, moves in different directions based on local factors. Consumers need to remember to watch their local area closely to understand the direction their market is heading.”

The rising home values nationwide seen in May also played out in the majority of the country, with exceptions in the Northeast, which only demonstrated a 0.90% annual increase, data show.

“While smaller monthly increases and a slowing of the annual growth may sound discouraging, it is precisely the measured, healthy growth that is needed to embolden homebuyers and create a sustainable housing market,” Walters says. “A more balanced market between buyers and sellers almost always leads to continued steady home value increases.” 

Written by Cassandra Dowell

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  • Generally the difference between the view of homeowners and appraisers is much more fundamental than that stated.

    When it comes to home loans, lenders and their regulators generally require that appraisers submit estimated home values of subject properties based on the sales prices of comparable homes that have recently sold in the immediate area (known as comps). Usually three homes are used in the computation of value and the dollar value of any significant monetarily measurable differences be added to or deducted from the recorded sales prices of the comps. The adjusted sales prices of the comps are then added together and divided by the number of comps used in the computation. The quotient is usually rounded to the nearest $100 or $1,000 and reported in the appraisal report as the appraised value of the property.

    Homeowners usually establish their value by casual observation of offer prices on homes in the nearby area and hearsay. In some cases, they have flyers from homes which are for sale in their area.

    So homeowners look at ask prices adjusted for their subjective view of differences in the properties while appraisers must estimate values from averaging historical sales data subjectively adjusted for significant differences between comps.

    So simply put, homeowners generally estimate their home value from ask prices and appraisers, from historical sales data. So without arguing about reliability of sources, just the differences in the source of the indicia of value explains why in a market with rising consummated home sales prices, one would expect to see higher values from homeowners than from appraisers.

  • If the difference between appraiser and homeowner value estimates is only 1%, it’s a non-issue. Differences of 20-40%, as I have seen, are what creates problems.
    I have to think this 1% figure is an average of the “unders” and “overs”; would like to see the variance calculated using only appraisal values that fall UNDER homeowner estimates.

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