Appraised Values often do not reflect market values. We address this often because there is so much confusion about this in the overheated California housing markets.
The reason is that appraisal guidelines force appraisers to only use “closed” comparable sales. Appraisers cannot correlate to offers or pending sales.
Why Appraisers Can’t Use Offers or Pending Sales
In a quickly appreciating market, closed sale comps can be much lower than pending sales and current offers.
For example, we often see listings with 15 to 20 offers that are all higher than the most recent closed comparable sales. These offers are clearly the best indication of “market value,” but appraisers are no longer allowed to give any weight to them at all.
What This Means for Buyers and Sellers in Fast-Changing Markets
In years past (pre-2008), bona fide offers could be considered as an indication of value.
