O
ne of the most frustrating aspects of real estate transactions is seeing disparate results from multiple appraisals of the same property. However, upon closer inspection, there are often good reasons for these differences. To understand the varying opinions of value, consider the following factors.

    The estimated value of a property may not always reflect its market value. For instance, an appraisal's date can significantly impact its validity. In a volatile market, an appraisal that is more than six months old will likely be outdated. Even recent appraisals can become obsolete due to sudden economic shifts or natural disasters. The effective date of the appraisal, which may not coincide with the inspection date, also plays a crucial role.

    Moreover, it's essential to examine the intended use, user, and type of value defined in each appraisal. Appraisers must specify these factors as part of their scope of work. If an appraisal is conducted for insurance purposes or replacement cost, it may not be suitable for determining a selling price. Other types of value, such as value in use, retrospective value, or liquidation value, are also distinct from current market value.

    The highest and best use of the property is another critical factor to consider. This concept requires an appraiser to determine the most productive and feasible use of the land. For example, a mobile home park may be considered for subdivision, but if the rental income from the existing lots is more profitable, that would be the preferred use.

    If lenders suspect errors or bias in an appraisal, they can request a reconsideration of value (ROV) by the appraiser. This process has become more prevalent due to new regulations issued by federal regulators.

    Even with current appraisals and identical definitions of value, intended user, and intended use, discrepancies can occur. A review appraiser would examine various factors to understand these differences. These include comparable selection, adjustments made to the comparable sales, and how the appraiser reconciled market data. By analyzing these aspects, it's often possible to identify the reasons behind disparate appraisal results.