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Why Appraised Values Don't Always Reflect Reported Price Increases

by Administrator on Aug 28, 2013 General Appraisal 2215 Views

One of the problems with general statistics in real estate is that the numbers that are thrown out to the public usually describe only a subset or a specific group of properties.  If a Board of Realtor's report or Home Builder's report indicated that sales prices were up 20% in for example Phoenix over the last year, that doesn't mean that all dwelling units increased in value by that amount. 

Geography matters, prices may not have changed by that percentage in both north central Phoenix and south Phoenix.  Zip code sales reports are at times made available to agents and appraisers and readers can contrast the highs and the lows in a metropolitan area and there can be dramatic differences from one zip code to the next.

The fact of the matter is that the supply and demand for homes can vary from one part of town to another, and the appreciation rate reported in the news may have little or no relevance.

Often the statistics that are published apply to one small segment of the population of single-family residences (SFR) like new SFR homes or resale SFR homes that are sold and not to other property types like condominiums, duplexes or apartments.  Just because the sales price of new SFR homes increased by 20% doesn't mean resale SFR homes also increased by 20%.

You may also ask, does the construction year of a home make a difference in its appreciation rate?  I would tell you "of course it does," but that doesn't matter to the Press.  They are just interested in getting a big number out there to say "look how things are getting better."  It may be that per-1990 built SFR homes in one area did not appreciate by that much while post-1990 SFR homes in another saw strong appreciation.

There are many variables that relate to the increase or decrease in value of a specific property.  Appraisers try to take into account as many of them as possible in an appraisal report.

Thus a statistic reported by the Press, reported on the radio and / or talked about on TV may be telling you little or nothing specific about the change in the sales price of say post-1990 SFR homes located in north central Phoenix, but you will never be provided with that information. 

For more appraisal information contact Glenn Rigdon MA, MRICS, ASA is a Las Vegas / Henderson Nevada appraiser who can be contacted via email or via his business website Appraiser Las Vegas  (http://www.appraiserlasvegas.com), or you can also click on “Contact Us” on the home page of this website or visit my public profile at LinkedIn at http://www.linkedin.com/pub/glenn-rigdon-ma-mrics-asa/1a/30b/879/.  

Article source: http://www.appraisalarticles.com/General-Appraisal-Articles/4393-Why-Appraised-Values-Donand-039-t-Always-Reflect-Reported-Price-Increases.html

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