A common reason for a low appraisal is a property that is overpriced for the area. This happens when sellers make structural additions, landscaping, and interior improvements that other homes in the area don’t have. When they sell and try to recoup the dollars they spent in improvements, they price the home way over what other homes are selling for in the area. Should a buyer come along and offer close to the asking price, the sellers’ expectations will crash head on with reality when the appraisal comes back.
Real estate agents also contribute to low appraisal problems. Too often an agent inflates the value of a house in order to get a listing. Sellers should know better, but greed gets in the way. Hope springs eternal that lightning will strike and the agent can get them a higher offer. If a high offer does come along, the appraisal will inject reality into the sale, and a low appraisal will be the result. The most common result of overpricing is that the house will stay on the market through a series of agents and incremental price reductions. Eventually, the price will hit market value and a sale will occur. But, depending on the sellers’ circumstances and market conditions, that can take months or even years.
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