Appraised value may not be the same as PERCEIVED value. It's a difficult concept for homeowners to comprehend when it comes time to list their home for sale.
Yes, being able to predict the appraised value with a high degree of certainty is very important when it's time to sell your home. Appraised value is almost exclusively influenced by COMPARABLE RECENT SALES. Yes, you read that correctly, SALES, closed transactions.
Active listings and under contract listings are NOT comparable SALES.
A comparable property is defined as one that is similar in age, style, square footage, lot size and condition in an area that is PROXIMATE to the subject property. Sales that are most recent and closest to the subject property and are most similar are given the MOST WEIGHT on the appraisal.
While the appraised value assessment is fairly clinical and follows an analytical approach, PERCEIVED VALUE is more subjective.
Perceived value is found in the EYE OF THE BUYER.
When looking for a home to purchase, the typical buyer starts within a certain price range.
Once the buyer has identified their appropriate price range, they drill down to a particular area.
90% of buyers then start their home search on the internet. Browsing available homes and COMPARING different neighborhoods and homes within those neighborhoods based on the photos presented.
Buyers begin their physical inspection of properties with their expectations set. They know what they can get within their budget and properties that do not measure up will be immediately discarded.
For example, if there are 5 homes available, all within budget, in the same neighborhood of the buyer's choice, 3 of which have been updated to include granite, tile, hardwood, light fixtures, fresh paint and are well presented with attractive furnishings and 2 have not, WE HAVE ACHIEVED A DISCREPANCY IN PERCEIVED VALUE.
While all five homes may actually be have a similar appraised value, the buyer sees things very differently.
When a home DOES NOT MEASURE UP TO THE BUYER'S EXPECTATIONS they see:
1. Potential for deferred maintenance on important mechanical systems
2. A painting project that will need to be addressed immediately upon moving in
3. Home improvement projects that they will not have the cash to complete for years to come
4. A home that they will not be proud to show their friends and family
5. A home that they DO NOT have to settle for
In short, they will just keep looking.