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By Ryan Lundquist

All sales in neighborhood vs similar sales - by sacramento real estate appraiser

I was hired recently to do an appraisal and the value came in far below than expected. Why did it come in so low? Was it something I did wrong or was it the market? There are of course some botched appraisals out there, which is unfortunate to say the least, but sometimes a contract price is simply out-of-sync with the market. Let me share an example of a legitimately “low” appraisal.

The subject property is in contract at $370,000, which would literally be the highest sale in the neighborhood over the past five years. Of course it just might be worth the most because one property has to take that honor, but in the case such a high value starts to seem suspect when all competitively sized properties have topped out at $300,000 as you can see from the yellow dots. If all other similar sales are selling far below the contract price, that usually speaks volumes about what the market is willing to pay (unless of course there is a reason why the subject property is worth profoundly more).

contract price vs similar sales - by sacramento real estate appraiser

This graph helps paint an even more compelling story of value and shows the disparity between a lone-ranger contract price and the rest of the market. If this was a custom home or there was something incredible about the property, it might make sense to see such a difference in value, but this is a very standard tract home and it ended up being worth close to $100,000 less than the contract price. Yikes. But based on the graphs above, doesn’t it makes sense? Wouldn’t it seem suspicious if the appraised value and contract price were the same in this case?

How to Challenge a Bad Appraisal: This is a clear case of a property being overpriced, yet there are certainly scenarios where the appraisal is simply off-base. In case it’s relevant, I wrote a piece on BiggerPockets.com about how to challenge a legitimately low appraisal. I included a downloadable format to use too. It’s free. Go get it HERE. I hope my tips and format are helpful.

Question: Any further thoughts or stories to share?

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