Cleveland-based Corporate Settlement Solutions (CSS) released an analysis Thursday that highlights a growing gap between appraised home values and sale prices. Across the 19 East Coast and Midwest states in which CSS operates, appraisals were higher than sale prices in 57% of transactions during the second half of 2024.
That share was up from 53% in the second half of 2023 and 51% in the first half of 2024. Properties are deemed “over-appraised“ if the appraised value is $2,500 or more than the sale price. Conversely, they are considered “under-appraised“ if the sale price is $2,500 or more than the appraised value.
“Over the past four years, home prices have increased significantly in many markets, but recently the rate of growth has begun to slow. These are just two of the challenges appraisers face in the current mortgage market,” Ashley Jelinek, CEO of CSS, said in a statement.
“We launched our Appraisal Price-Gap Analysis last year to help the market, as a whole, understand the delta between appraisals and sale prices. Accurate, market-centric valuations are key to a healthy mortgage market, so it will be interesting to see how well appraised values align with market-driven sales prices throughout 2025 as the housing market continues to find its new normal.”
According to the most recent data from the S&P CoreLogic Case-Shiller Home Price Index, U.S. home prices rose by 3.6% year over year in October 2024. That’s down from a three-year average growth rate of 5.8% and a five-year average growth rate of 8.9%.
From July through December of last year, 57% of appraisals conducted by CSS came in higher than the sale price. Another 36% fell within $2,500 of the sale price, meaning they were neither undervalued or overvalued. Only 8% were considered under-appraised, down from 12% in the second half of 2023.
Under-appraisals are relatively rare and can upend a real estate transaction if the buyer and seller need to renegotiate the sale price, or the buyer needs to come up with more cash to close.
CSS noted that the average over-appraisal was 4% more than the sale price in these states, while the average under-appraisal was 6%. The share of properties that were under-appraised shrank from 8% while the share that were over-appraised was unchanged compared to the second half of 2023.
Among the states in the CSS footprint, Pennsylvania had the highest share of properties with over-appraised values at 76%. It was followed by Kentucky (63%), Virginia (61%), West Virginia (60%) and Florida (55%). At the other end of the spectrum, only 38% of properties were over-appraised in New Jersey.
Under-appraisals were most common in Indiana, where this occurred on 17% of transactions with an average under-appraised value of 6%. Pennsylvania and Florida each had under-appraisal shares of 10%. In Virginia, however, virtually none of the appraisals conducted in the second half of 2024 were considered under-appraised.
