Real Estate Agent: Appraisal Report Doesn't Always Reflect the True Market Situation

In quite a few real estate sales listings, it is mentioned that there is also a property valuation report. It is worth noting that the report is drawn up based on transactions that have already taken place and therefore may not always be in line with the current market situation, explains ELUM Real Estate broker Egon Juhanson.

"As you may recall, a few years ago when the real estate market was booming, there were problems with prices moving ahead of the values in the valuation reports, and the buyer had to pay the difference from their own pocket. This also happened, for example, with show apartments in new developments or secondary market apartments with expensive furnishings. Often, some deals simply fell through due to price differences," Juhanson says.

Today, however, the situation is the opposite, and often valuation reports based on old transactions come out higher than the current real market value. Since sales periods have lengthened, the expiration of valuation reports has become an even more serious problem.

"It is not rare when sales are started at the amount worthy of a valuation report, but there is absolutely no interest and the price has to start dropping. I recommend basing your decisions on the current market situation and consulting with a specialist about the price. A valuation report is still an informative document and the final price is determined by the agreement between the buyer and seller," Juhanson says.

Therefore, ordering a valuation report when starting a sale is not essential. It is, however, still necessary when taking out a loan, as it is a document that shows whether the property is liquid and whether the price agreed upon by the buyer and seller corresponds to the amount up to which the bank is willing to provide a loan.

According to Egon Juhanson, prices in reports and on the real market should begin to equalize this year, as the price level has been declining and has now reached stability.