Should a Seller get a Pre-Listing Appraisal?
The answer is Yes, Absolutely!!! Before hiring a real estate agent a seller should first obtain an independent appraisal on the home. A Pre-Listing Appraisal is the most underutilized tool available to a Seller. I am of the strong opinion that when considering the sale of a home, the first person to call should be a local Certified Appraiser. That is where the process should begin. A Pre-listing Appraisal is like preventive medicine for your financial well being that will avert costly problems down the road.
For starters you quickly eliminate the Real Estate agents who claim they will get you the most money just to get your listing. They most likely know there will need to be a price reduction eventually. With the knowledge of the true market value of your home, you can interview and select a Realtor who will best market and facilitate the sale of your home.
Or flip that on you, the seller, passing up on the best Realtor because they suggest a lower price than what you want. An Appraiser is trained to look past the hype of just the highest sale in the neighborhood and will analyze numerous factors that impact the value of your home.
A Pre-listing Appraisal is about the best marketing tool to present to potential buyers. Knowing that the value was determined by a third-party Professional will help build confidence and reduce drawn out offers and counter offers.
But a lender will order an appraisal later, so why do I need one before listing my house?
The lenders appraisal happens after you receive an offer and agree on a price with a buyer. If your home was under-priced, you will be walking away from a significant amount of money with little recourse at that point. If it was over-priced and you happen to get a contract on it, then the lender’s appraisal will come in low reflecting that the contract price is too high. You now have all the parties with a financial interest in the property like the buyer, real estate agents, you the seller and even the loan officer, panicked and pointing fingers. And due to a lot of misinformation floating around those fingers are usually pointed at the Appraiser.
Appraiser’s have massive oversight
There are stringent guidelines Real Estate Appraisers follow from the Uniform Standards of Professional Appraisal Practice (USPAP), Fannie Mae’s Selling Guide and lender underwriting requirements in determining the market value of your home. It is extremely unlikely that they would be dead wrong in their analysis and value. Keep in mind, if the market doesn’t support the sales price, they’re fully aware that they must be the one to blow the sale of your home. And they’re not happy to be the bad guy in the scenario.
Why can’t a Real Estate agent come up with a price?
Real Estate Agents are Sales People NOT Value Experts. If you can find an intensely analytical Realtor, it is possible they could provide you with a value estimate similar to what a Pre-listing Appraisal would. However, they’re not easy to find and rightfully so. The most successful agents I know refer valuation of their listings to appraisers so they can keep their focus on their sales skills.
An appraiser will complete an in-depth analysis while considering a multitude of factors like market conditions, quality, lot size, view, location, recent or past updates, remodeling, additions, garage conversions, outdoor amenities, positive or negative external factors, sales history, physical deterioration, functional obsolescence, marketing time and the list just keeps going on. The result is market value or range of value that is well supported by the data.
Why are Home Appraisals so Darn Expensive?
During a Real Estate transaction there are plenty of costs, some paid by the Seller and some by the Buyer with the largest sums paid out on a commission basis. However, while valuation is paramount, the fee of an appraiser is a fixed cost and the least expensive.
Depending on your views you may consider your home to be an asset, a liability or an investment. But no matter the column you list it in, an educated financial decision regarding your largest investment/asset/liability is worth the cost.
Most Appraisers will gladly work with Sellers and Realtors at the beginning and can save a Seller considerable time and money down the road. While you want to get max dollars from the sale of your home, the borrower wants to get the best deal possible, the realtors and often the loan officer are working on a commission, a third-party Appraiser can provide value in their unbiased analysis and determination of the true market value of your home.