If you want to sell, why call a real estate appraiser first?
Related article: "Why an Appraisal Before You Sell is Money Well Spent"
If you think your agent is your best friend and always gives it to you straight, you might be surprised to read this article. It is in your agent’s best interest to tell you that your house is worth more than it is. This is because, if you estimate that your house is worth $250k and the agent you’re about to hire estimates it is worth $225k. Are you going to hire them? Probably not, especially if you found another agent that tells you want you want to hear.
It is well known among real estate professionals that most home owners think that their house is worth more than it is. It is likely that you’ve overheard the voice in your head telling you something similar to, “there are no other homes like ours,” or “our house is the best on the street,” or “we have the best location because…” Although these thoughts may be founded in truth, it is also true that other properties with more desirable features exist and have trouble selling.
It is a real estate agent’s job to be positive, point out all of the best features of your house, and go sell it. The problem occurs when the property has listed for a time and no one comes to look at it or no offers are made. This happens more often than not in a down real estate market.
In the appraisal process, I routinely compare the median list price of a particular property type and location to the median sales price of similar properties. It is not unusual in a down market to find a difference of more than 20% when properties are typically selling at 97% of list. This shows that most of the time, agents are over pricing properties and then slowly reducing the price until offers are eventually made. At this point, the property has become market bare and the seller is often so frustrated with the sales process or, depending on the situation, so desperate to get out, that the property sells for less than it should have.
This is where an appraiser can help in the selling process. An appraiser provides an independent and unbiased opinion of value. The value is typically supported using comparable sales that have been carefully dissected, analyzed, and verified. The appraisal process is far more detailed and accurate than Broker’s Price Opinions (BPOs) or Automated Valuation Models (AVMs) like Zillow or others (look for upcoming discussions in my blog).
The following is a list of ways that an appraisal or appraiser can help a property owner before listing.
· The appraisal will help to educate the seller prior to listing. Knowledge is empowering.
· The appraisal could show that listing at this time may not be financially feasible; something an agent probably doesn’t want to tell you.
· The appraisal could uncover value, such as development potential, that your agent missed.
· The appraisal will give the seller a tool to help them determine which agents are giving them strait information and what kind of market time is reasonable to expect.
· The appraisal gives the seller a knowledgeable contact to ask follow-up questions.
· The appraisal gives the seller a basis to judge offers that come in. One thing I try to give users of pre listing appraisals is a range of value in addition to the most probable. This way, the seller can gauge the strength of an offer.
· The appraisal gives the owner a low cost way to obtain expert advice, if they decide to avoid an agent.
· The appraisal is recognized by buyers and can be an important bargaining tool.
· The appraisal will come with a sketch that can be used to enhance the listing and possibly increase the square footage estimate.
· An appraiser could give you an idea of the typical range of agent commissions in your area to help you negotiate the best deal.
These are just some of the reasons that a real estate appraiser should be called before you list with a broker. It is not by mistake that banks almost always call appraisers before listing a property with an agent. The typical appraisal only costs $450. The sale of a typical $250,000 house costs $12,500, just in agent commissions. An appraisal will give you confidence that you maximized your value and could save you thousands. A pre listing appraisal is good value and a smart decision.
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