Eight percent: The value gap between owner and appraiser

It’s human nature for homeowners to be overly optimistic about the value of their homes. A new study published in the Journal of Housing Economics estimated how much – eight percent.

Researchers say that the overvaluations often are from owners who miscalculate their estimations over the capital gains they’ve accumulated in the house. The study echoes similar findings from a recent survey conducted by Quicken Loans, which found a “widening gap” between what homeowners think their home is worth and appraisers’ valuations.

In a recent article, The Seattle Times asked appraisers why owners tend to overvalue their homes — besides the emotional attachment they likely have to it. The appraisers said homeowners tend to have unrealistic expectations about how much their improvements add to the home’s resale value.

Appraisers also note that homeowners often don’t realize that they may have over-improved their home compared to others in the neighborhood, which can lead to overestimated values.

Plus, homeowners who install highly personal and costly remodeling items commonly don’t see the full-cost payback on those projects either. So, if an owner installs a luxury indoor lap pool or spa for their personal desire, they can’t expect that prospective buyers will view it as valuable as they do.