Appraisal problems in a hot real estate market

The Rob Ellerman Team at ReeceNichols
The Rob Ellerman Team at ReeceNichols
Published on October 26, 2020

Real estate markets aren’t static. But, when a market is as “hot” as the current one, it presents problems for homebuyers and sellers.

When a lender’s appraiser visits your home, he or she will gather all the information needed to compare it to other homes that have recently sold to determine its value.

This method is known by several names, most commonly, the Sales Comparison Approach or Market Data Approach.

For this method to produce reliable results, however, the market must be active, with enough recent sales to use as “comparables.”

When a market is overactive, with home prices rising rapidly, such as the current market, problems also arise. When a home sells, prices may rise between that sale and the time your home hits the market.

But there is no comparable sale for the appraiser to use. Does he or she base the value of your home on the pre-price rise sales? Sadly, the answer is yes.

“The strongest indicators of current value are those comps which have closed within the past 90 days,” according to the experts at

“Pending sales and listings are only used on the appraisal report to show what the current market is doing; appraisers do not consider these comps in their final opinion of value,” they conclude.

Here’s a common scenario

Joe and Janet listed their home, located in a desirable school district. There was immediate buyer interest in the home and offers began rolling in.

A bidding war ensued, with anxious buyers offering more than list price in their attempts to win the home.

Joe and Janet were naturally thrilled. Until, that is, the appraisal results came in and the home didn’t appraise for the amount the chosen buyer offered.

When historical data lags the market’s reality, agreed-upon prices and appraised value often don’t match, Mark Johnson, president of LRES Corporation tells’s Alex Roha.

According to The National Association of REALTORS®, more than one-fourth of offer prices are higher than the appraised value.

So, what is the solution?

One way to mitigate the challenges of a red-hot housing market is to get your ducks in a row before the appraisal.

Take stock of any upgrades and other improvements you’ve made to the home. Create an itemized list of them, the dates they were performed, by whom and include a copy of all invoices.

Put these in a file folder along with a short narrative of why a nearby home may have sold for less than it should have (if you are privy to this information).

For instance, if Mary down the street had to quickly get to a new city to take a job so she was willing to take a loss on the sale of her house, the appraiser should have this information.

If you won’t be home for the appraisal, leave the folder, clearly labeled “For the Appraiser,” in an area where he or she can’t miss it.


Roja claims that “All appraisal experts were in agreement that a lack of communication is a breaking point for the expectations of what the home is worth in collateral.”

He goes on to state that, according to Joni Pilgrim, CEO of Nationwide Appraisal Network, “… 99% of the time, there are zero details about the subject property prior to the appraisal.”

Don’t leave the discovery of the details of your home to chance. Ensure the appraiser knows all the positives about the home.

If all else fails

If the appraisal of your home comes in lower than the agreed-upon price, the buyer can challenge the appraisal.

His or her real estate agent will do most of the work here, including putting together a list of more recent comparable properties, a copy of everything in the folder you left for the appraiser and anything else that might justify the price the buyer offered.

Fiery real estate markets such as what we’re experiencing are a dream come true for sellers, unless prices are rising so fast that the market can’t keep up. Hopefully, our suggestions will help if you get into a low appraisal situation.

Want to know the value of your home?
Our agents will figure it out for you for free!
No, thanks I'm not interested

Let's Talk Real Estate!

Check out our New Constructions Homes!
See Open Homes!