The Gap Between Perceived Home Value & Appraised Home Value

For anyone who ever loved to track down baseball cards, comic books, or other collectibles, there was nothing like looking up the value of your most prized possession. For kids, it was often a harsh discovery that the outfielder you spent several dollars on was worth just a fraction of the selling price. Finding out that perceived value and actual value aren’t the same is a lesson that adults deal with too, but on a larger scale: home sales.

There has always been a difference between what sellers believe a house is worth and the value estimated by an appraiser. In the last decade, the average spread has been as much as 8% when home prices dropped at the start of the Great Recession. The gap between what homeowners believe their home is worth and what the actual value is widened for the fifth consecutive month. Appraised property values came in 1.9% lower than what homeowners expected, according to April’s Quicken Home Price Perception Index. It is the largest gap since last June, when the spread was at negative-1.93%.

Differences of opinion between sellers and appraisers are more likely to occur in rapidly changing markets. In a hot market, prices may actually rise more quickly than sellers expect, whereas it is the appraiser’s job to be aware of such unsustainable market changes. Conversely, if the local housing market is doing poorly, sellers may not realize that area homes are being appraised relatively lower than their perceptions. With the housing market roaring ahead, there are more buyers than sellers, a fact that should continue to push home prices up in the coming months.