Price your home incorrectly and it could mean a long stay on the market, a final selling price lower than what the house is worth or both. That’s why some homeowners are electing to pay $300 to $400 for an appraisal before putting their homes on the market, said Alan Hummel, past president of the Appraisal Institute.
Although real estate agents often do their own market analysis to price a property – and many times do a decent job – the appraiser can come in with an independent, unbiased opinion to make sure the price is right, Hummel said. In fact, if a property isn’t getting any serious lookers, an agent might even encourage his or her client to invest in the service for a second pricing opinion, he added. The greater attention to precise pricing is a change from years ago, when a house could be listed at a lofty price just to see how much it would fetch.
“Now you’ve got to be competitive and you have to know that the offers coming in are reasonable,” he said. Also, if a property spends too much time on the market, the price it will be able to command often decreases, he said, as some buyers will question the reasons for the property’s inability to sell.
An appraisal will look at the home from a visual standpoint, taking into account considerations from the proximity to schools to cracking or flaking paint, trying to react the way a typical purchaser would.
The appraisal also will analyze the health of the local real estate market, giving homeowners more personalized expectations for selling their home—a feature especially important with the plethora of national news stories generalizing the real estate market, Hummel pointed out.
Appraisers can also use a cost approach, which will determine the price tag on a new home built to the same specifications of the existing home, Hummel said. The comparison can be helpful for newer houses hitting the market because it lets sellers know what their home is competing with on the new-construction front.
It also might not be a bad idea to dig through the file cabinet for the appraisal report you paid for when you first bought your home.
Few spend time reviewing the paperwork at the time it is completed, when people are primarily interested in securing the home and buying the house. Doing so, however, can remind homeowners of flaws found the first time around, and sellers might want to address curable problems before hitting the market.
What should you know about home appraisals? Listed below are five nuggets of appraisal insight, courtesy of the American Society of Appraisers:
What the appraisal report includes: Your appraisal – which could range in length from two or three pages to more than a hundred, depending on its scope – will include details about the house, a description of the neighborhood and side-by-side comparisons of similar properties. It will also contain an evaluation of the area’s real estate market, notations of major problems with the property that will affect its value and an estimate of the expected time it will take to sell the property.
How an appraisal report is developed: Appraisals are opinions of value, and residential real estate appraisals compare your home with similar homes that have sold. Remember, an appraisal is not the same as a home inspection. Inspections look for physical imperfections in the home, making sure it is structurally sound and so forth.
How to get a copy of your appraisal: You paid for an appraisal when you bought your house. If you didn’t request a copy of the appraisal at the time, you can request it from your lender – it’s your right under federal law.
What to look for in the report before you sell: Focus on items that had a negative adjustment – they might be a good checklist for elements to update or remodel. Examples of issues that could cause a negative adjustment: less than the typical number of baths for the house’s size, outdated kitchens and baths, or a one-car garage or no garage in a neighborhood where two- and three-car garages are standard.
Why an appraisal before your home hits the market might be wise: The fresh appraisal will help accurately price the home and ensure it will eventually appraise for your asking price at the time of the sale. Sellers are sometimes shocked when their house appraises below the asking price, which could cause a deal to fall through or for the seller to be forced to reduce the home’s price.
Submitted by the PR Committee of NMAR