08/21/2026
Let's talk about one of the BIGGEST frustrations in the Real Estate Industry, and quite frankly one of the biggest detriments to you as a seller, buyer, and/or agent. It's what I call "Real Estate's Dirty Little Secret" and few people want to talk publicly about it. But it's going to get worse so the public needs to be warned...
APPRAISALS
The things that give us ulcers and keep us up at night. The reports that literally make or break a transaction and affect the sale. The reports that are done by (most often) people who do not have a real estate license and who do not work with buyers and sellers day in and day out like we agents do. The end-all-be-all that it is almost IMPOSSIBLE to argue against if it comes in too low.
Let's start from the beginning..... What exactly is an appraisal, you ask?
An appraisal is defined as "an unbiased, professional estimate of a property's fair market value." [take note of the word "professional" and let's pin this for moment]
But what is 'Fair Market Value?' Fair market value (FMV) "is the price an item or property would sell for on the open market. It assumes both the buyer and seller want the best deal, know the facts about the item, have enough time, and feel no pressure to make the deal." In simpler terms, Fair Market Value is what a buyer is willing to pay. It is the value a buyer assesses on a property.
So how is it that appraisals fail when a buyer is willing to pay a certain price?
Well, my friends, that's exactly what we agents would like to know. Because here is the fact: WE (as Realtors) are professionals in our industry who work with buyers day in and day out. WE know what they like, we know what they don't like, we know what excites them, repulses them, etc. Experienced agents also do an incredible amount of homework before we price a property. Almost EXACTLY like an appraiser, we compare similar properties that have recently sold, are currently for sale, or recently expired and make adjustments for differences to determine the most likely sale price. When I personally price a property, I try to price it at the exact dollar amount that it will likely sell for in order to keep it "appraisal proof," but also to keep the price attractive to buyers and instill a sense of value in them when they come do their walkthrough.
Unfortunately we can perfectly price a home and get an offer on it close to the asking price, but an Appraiser can come in and say "nope, sorry." And the worst part is, there is almost NOTHING we can do about it. In fact in 25 years I can only remember three times when we were able to successfully dispute a bad appraisal.
Let's take one of my current properties as a prime example. I priced this adorable home exactly where it would likely sell based on three other homes - in the immediate neighborhood - that had sold within the last six months. In fact I priced it BELOW a property that just sold a month before that was similar in size, similar in price, similar in style, had a slightly smaller lot, similar condition, had a finished basement (same as my listing) but only had two bedrooms whereas mine had three bedrooms plus another in the basement (where there is an egress window). The only thing this other house had that was 'better' than my listing was central air and garage that was in better condition than my listing's garage. But I adjusted for those differences in my initial Market Analysis which is why I priced it below.
So... we list the property and instantly get several showing requests. Right away two of the first three buyers in the door submit offers. Both strong offers within 6% or less of the asking price. Another "very interested" buyer saw the house but didn't have time to get their ducks in a row to make an offer by the time we were ready to make a decision on the offers already in hand. We also had two more showings scheduled the following weekend that we ended up cancelling because of the two offers already on the table.
We accepted the higher offer - which was within 3% to 4% of the asking the price. Remember we had TWO buyers willing to pay within 6% of asking price. Those two buyers had different agents - both of which agreed that their clients were making strong offers. So let's go back to the previous comment about being a "professional" opinion. THREE Realtors agreed that the price on the property was within market value. Me and two other agents. THREE "professionals" who are in the business EVERY day agreed that the house was valued adequately.
Now let's fast-forward to FOUR DAYS BEFORE CLOSING and the appraisal is FINALLY submitted... and it's 9% below value. Which was 10% below the most similar comparable sale from just a month ago. And with no indicators whatsoever that the market was beginning to decline. In fact - the market in this area is still hot (as evidenced by the multiple offers and multiple showings)
PUNCH IN THE GUT!!!!!
So now what? It's 4 days before closing. My seller is already moving out. Even if we wanted to dispute it we don't have time and quite frankly it's almost IMPOSSIBLE to dispute an appraisal.
Ideally we would have been better off to go back to the 2nd place buyer and ask if they still wanted the house, and we should have cancelled the current offer and refused to reduce the price. But now that means 30 more days of waiting while Buyer #2 gets their financing around, and we are once again at the mercy of an appraiser (although we would pray that the next appraiser had a little more knowledge and was a better judge of value). And sometimes that's what happens. Some sellers simply say no and they put the house back on the market and wait for another buyer with a different appraiser. So now the BUYER is also at risk!
The sad reality - we were backed into a horrible corner and couldn't do anything about it without incurring more cost, more time, and still some risk.
And we can't go back and sue the appraiser for the lost money or lost income. So the seller loses, the agents lose, sometimes the buyers lose, and now future home sellers in that neighborhood lose because this house is now selling BELOW the value it should have - which means its going to affect THEIR value when it comes time for their appraisal.
Often when this happens, Sellers first instinct is to get mad at their agent... and I can say, in some instances, yes agents do mess up and price a property incorrectly. But in this example I had documented proof that we priced the property appropriately because I had the comparable sales from my Market Analysis, and I had evidence of at least TWO buyers willing to pay a higher price [ which, again, = "Fair Market Value"]
Thankfully my seller knew it wasn't my fault and for that I am so grateful. But it's still a punch in the gut for me and especially for my seller. And now I have to break the news to the other sellers I'm working with who are still doing final touchups on their house (in the same neighborhood) in preparation of selling it within the next month.
And I get it - loose lending guidelines and grossly biased appraisals are what led to the market crash in the early 2000's. But that is NOT what is happening here. Lending guidelines are much more strict and we are no longer allowed to choose our Appraisers (now it's a blind draw and we get who we get).
The other extremely aggravating point about appraisals that I want to throw out there: Appraisers are constantly calling and asking us Agents about specific details of past sales.
Example: they call and ask if the seller paid the buyer's closing costs. Why do they ask that? Because - in their eyes - that means the house sold higher than it would have had the seller not paid those closing costs on behalf of the buyer. So now they devalue the property they are currently appraising based on that information. The problem is, they aren't asking other key questions that would also affect the value of the house. Like... if the appliances stayed. Or who paid the buyer agent commission. Or if anything else was left behind (like wall mounted TVs or moveable kitchen islands or a non-attached massive entertainment center. They aren't asking if something had to be done to the property before closing as part of the negotiation (such as the seller replace the garage window that was broken or paint the deck because it was beginning to chip). All of those things affect the value of the property, too... but those don't get factored into appraisals - yet closings costs, which are extremely common, DO become a part of assessing value.
It just doesn't make sense to me and never will. So why do these people get the final say in our sales? Why are these "professionals" opinions more important than those of us in the industry EVERY SINGLE DAY working with the buyers and learning why and how they value properties the way they do?
I wish I could tell you, but sadly it's the "law" and we must abide by it. I don't agree with it. I don't like it. I can't change it. I simply want future sellers to understands that this is a risk we take - even when we price a property perfectly.
And while Appraisers are supposed to be unbiased - sadly we see extremely biased appraisals OFTEN.
So take this post for what it's worth - just a warning that you can have the best agent, the perfect price, multiple offers... but you still might lose to a bad appraiser.
I'm still going to do everything I can to make sure I'm pricing my properties appropriately. Just know that even in my 25-year experience, I may get overruled by a "professional" who really doesn't have a clue what Fair Market Value is.
