Do Appraisals Usually Match the Asking Price?

When it comes to buying or selling a home, one of the most critical steps in the process is determining its value. This is where appraisals and asking prices come into play.

But do appraisals usually match the asking price? The answer isn’t straightforward, as several factors can influence both figures. In this blog post, we’ll delve into the intricacies of appraisal vs asking price, exploring what they are, how they are determined, and why they might differ.

What is an Appraisal?

An appraisal is an unbiased estimate of a property’s market value conducted by a licensed appraiser. This professional assessment is often required by lenders to ensure that the loan amount does not exceed the property’s worth. The appraisal considers various factors such as:

Location: Proximity to schools, parks, shopping centers, and other amenities.
Condition: The state of the property’s structure and systems such as the electrical system and the plumbing.
Comparable Sales: Recent sales of similar properties in the area.
Market Trends: Current real estate market conditions specific to the area.

The goal of an appraisal is to provide an objective valuation that reflects what a buyer might reasonably pay for the property.

What is an Asking Price?

The asking price, also known as the listing price, is set by the seller and their selling agent. It serves as a starting point for negotiations between buyers and sellers. Factors influencing the asking price include:

Seller’s Financial Needs: Mortgage balance, desired profit margin, desired speed of sale.
Market Conditions: Supply and demand dynamics in the local real estate market.
Agent’s Advice: Recommendations from real estate agents based on their expertise.
Property Features: Unique attributes or upgrades that add value.

Unlike appraisals, which aim for objectivity, asking prices can be more subjective and influenced by personal motivations.

Factors That Cause Discrepancies

Market Conditions

In a seller’s market where demand outstrips supply, sellers might set higher asking prices expecting multiple offers. Conversely, in a buyer’s market with more inventory than buyers, sellers may lower their prices to attract interest. These market conditions can lead to significant differences between appraisal vs asking price.

Property Condition

If a property has unique features or recent upgrades that aren’t common in comparable homes used for appraisals, it might justify a higher asking price. Perhaps it has stunning real wood floors or a state of the art smart elections system. However, if these features are overvalued by the seller or not appreciated by potential buyers or appraisers, discrepancies are likely to arise.

Timing

Appraisals are snapshots of current market conditions but can quickly become outdated in volatile markets. If there’s been significant change between when an appraisal was conducted and when an offer is made (or vice versa), mismatches between appraisal vs asking price can occur.

Emotional Value

Sellers often have emotional attachments to their homes which can inflate their perceived value beyond what an objective appraisal would suggest. This emotional bias frequently leads to higher asking prices compared to appraised values.

Why Matching Matters

For Buyers: A lower-than-expected appraisal can be beneficial as it provides leverage for negotiating a lower purchase price. However, if you’re relying on financing contingent upon meeting certain loan-to-value ratios (LTV), discrepancies could jeopardize your mortgage approval.

For Sellers: A high appraisal supports your asking price and strengthens your position during negotiations. Conversely, if your home doesn’t appraise at or above your asking price—and especially if it falls below your buyer’s offer—you may need to lower your expectations or risk losing potential buyers who can’t secure financing.

Bridging The Gap

Negotiation

When there’s a gap between appraisal vs asking price:

Renegotiate Terms: Buyers may ask sellers to reduce their price.
Split Difference: Both parties agree on meeting halfway.
Pay Difference: Buyers cover any shortfall out-of-pocket if they believe in long-term value appreciation.

With property likely the biggest purchase you make in your life, the stakes are high. It is of course essential to have a skilled negotiator on your side to ensure you arrive at the best possible outcome, especially if there’s a significant difference in appraisal vs asking price. If your appraisal doesn’t match your desired asking price, its their job to justify it. They will ensure the full worth of your property is marketed in the best possible light and in all the right places.

Re-Appraisal

Requesting another independent appraisal could yield different results due to varying methodologies among appraisers. This could be useful but should be approached cautiously because it is costly and there’s no guarantee that the outcomes will be any different.

Marketing

When my clients ask me whether appraisals usually match the asking price, I encourage them to look at the question differently. Yes appraisals matter, especially in terms of potential lending, but the retail market is animated and dynamic. So many factors come in to play, so many opportunities exist.

Knowing how to find the right buyers for your property gives great leverage. With the right professional photos and videography, expert staging, and extensive online visibility across top platforms, we can ensure that all the unique and profitable features of your property are supremely highlighted. This ensures they will be appreciated by the multitude of potential buyers. Getting the marketing right, is essential.

Conclusions

When looking at appraisal vs asking price and asking the question do appraisals usually match the asking price, the only real answer is a vague one – ‘not necessarily’!

‘Value is what people are willing to pay for it.’ John Naisbitt

Setting an asking price for your property is a critical step. The appraisal price comes into play but what really matters is working with an agent with an in-depth knowledge of the local market. An agent who understands the variety of local factors that will influence potential buyers. Someone who knows your neighborhood and can collate that alongside the county and country-wide trends that impact the market value.

Too low an asking price is a missed opportunity. But too high is a risk. You risk sitting on the market, raising a red-flag to potential buyers. You need to understand your market and you need a top-notch marketing plan to maximise on it.

Reach out to me today to find out how my proven approach will get you the offers your property deserves. I am an experienced Associate Broker Realtor in Mesa AZ, specializing in Las Sendas, Gold Canyon, Mountain Bridge, and Red Mountain. Check out my testimonials for how I can make selling your home fun and easy, and of course profitable!