Who knows a home better than its owner? No one recognizes details, like the subtle “swoosh” the furnace makes firing up, or how the morning sun shines on kitchen counters, than a proud owner.
But there’s one important aspect of their home that owners often can’t grasp: It’s current value. When they’re selling or refinancing, sellers must “price based on today’s existing marketplace, not what they hope it’s worth,” notes John Pinto, broker-owner, Realty World, San Jose.
In a monthly survey that Quicken Loans has been conducting since 2006, which compares the value that a professional appraiser puts on a home against the owner’s opinion, the appraised value usually is lower. Indeed, in September 2015, for the eighth month in a row, owners have overestimated their home’s market value.
Luckily, though, the difference is minimal, just 2 percent. That’s a sign that the housing market overall hasn’t seen quick drops or upticks, notes Quicken chief economist Bob Walters.
In the period from 2008 through 2011, owners’ estimates were 10 to 15 percent under appraisal values. That was the immediate aftermath of the housing crisis, when prices were falling rapidly, notes Walters.
“Appraisers are looking at prices everyday,” he explains, and in markets with quick prices rises or falls, appraisers see the trends more clearly.
Still, appraisal is “combination of judgment and scientific methods, so it’s entirely possible for two well-qualified appraisers to arrive at different opinions for the same property,” says Lance Coyle, president of the Appraisal Institute. It’s fairly rare for a purchase to be derailed because buyer is paying above the appraised value, says Walters.
But it’s not uncommon for an owner to think his home’s value has risen so much that he can refinance and get cash-back, Walters adds.
While “homeowners don’t have access to the same data as appraisers,” says Coyle, “visiting open houses in the neighborhood could give a good indication of how similar properties are priced.”
CTW Features