When Chris M. decided to list his home in upstate New York and move closer to Manhattan to ease his wife's commute to her new job, he ran into a major hurdle: "There was no consensus among the agents we spoke with about what our house was worth," he said. The solution? Hire a local appraiser to handle the job of evaluating the home's worth to help arrive at a listing price.
While appraisals are associated with the buyer's side
of a home-buying transaction, they offer a useful and potentially headache-saving tool for sellers. However, there are important things you need to know when considering an appraisal before you list your property. Here are a few pointers when it comes to home appraisals for sellers.
First, understand what an appraisal is (and isn't)
Basically, an appraisal is an "opinion of value," according to Kevin Donegan, an appraiser with Appraisal Source
in Floral Park, N.Y. Don't let the word "opinion" scare you. "An appraiser's job is to remain independent and develop on opinion based solely on factual market data," Donegan says.
Getting an appraisal isn't free--expect to pay between $300 to $500. So what's the point of doling out that kind of cash for an appraisal if it isn't even a necessary part of the home selling process? For one thing, it helps the seller determine a reasonable asking price that isn't too high or too low. Trying to set a listing price is often an anxiety-ridden part of the home selling process, so getting some neutral, well-informed help with this task will lift a lot of weight from a seller's shoulders.
An appraisal also helps sellers steer clear from accepting a low-ball offer on their home, especially during cooler markets. The appraisal sends the message to buyers and their agents that you've done your homework and can give you more leverage in negotiating a final price with a potential buyer.
Lastly, having an appraisal done before you list your home for sale gives you a chance to find out about any unnoticed problems with your home. It's better to know about these potential hitches before going into the negotiating process with a prospective buyer, only to have the deal fall through later because of them. (Similarly, a pre-listing inspection
can also help uncover problems with the home.)
Find a qualified appraiser
If you've weighed the costs and benefits of a home appraisal and decided to go ahead with the process, the next step is to find a qualified, independent appraiser. This is where the seller needs to let go a bit, since buyers, sellers and lenders are currently prevented from handpicking an appraiser of their choice. New appraisal-related legislation set to kick in before the year is up
could change this, but at present, appraisal management companies (AMCs) act as middlemen who have stables of appraisers to choose from for any given job.
Though sellers can't directly choose an appraiser, they can request that the appraiser be familiar with the home's local market. "If the appraiser is coming from an area, say, 50 miles away, in an urban or suburban area, and doesn't have much experience in your market area, there can be trouble," says Stan Thoren of S.A. Thoren, Inc.
Getting an appraiser with some sort of professional designation,
such as the Appraisal Institute's MAI, SRA and SRPA, also helps.
Prepare for the appraisal
Once you've scheduled an appraisal, it's time to get your home in order for the process. It's tempting for a seller to fret and frantically make sure the home is spotless in order to win the favor and high appraisal value of an appraiser, but that's not really the right way to approach this. While it can't hurt for a home to be in tip-top shape when the appraiser comes, the main concern should just be to ensure that the appraiser has access to every part of the house. "This may seem like common sense, but every appraiser has had many, many experiences of arriving at a property only to find that some portion of it was inaccessible at the time of inspection," says Donegan.
The appraiser's opinion of value technically won't depend on the quality of furnishings in the home or how much dust is visible, but Donegan notes that appraisers are humans, too, and are affected by many factors. "Bottom line, you don't have to go on a cleaning spree to get ready for an appraiser's visit, but there's also no reason for you to make it more difficult for them to see your home's physical attributes. Practically speaking, if your house is what you might consider 'a bit of a mess,' at least make sure there is room for the appraiser to move through the dwelling -- from room to room and floor to floor."
Tending to your lawn might also be a good idea, according to Chris Tesch
, an agent serving College Station and Bryan, Texas. "Anything that would make a buyer or an appraiser feel like your home is well cared for will translate into more generous offers or appraisals." The only "special" thing to do might be having a list of recent improvements on hand for the appraiser.
It's also important to highlight the unseen, according to Thoren. For example, if an appraiser visits a seller's home in midwinter, it couldn't hurt to mention the beautiful landscaping visible during the warmer months of the year. "The seller's Realtor should try to be present for the appraisal and should give the appraiser a list of comparable sales, and should also tell the appraiser of sale conditions for the subject property," Thoren adds.
What to do if you're unhappy with the appraised value
Once you have had the appraisal and listed the property for sale, it's time to wait for an interested buyer to get an appraisal of their own. This is where things could get messy, especially if the potential buyer's appraisal yields a different, lower value -- the situation that happened to Chris M. and his wife.
In that case, though the seller's appraisal won't be accepted by the potential buyer's lender, it could serve as a convincing piece of support should the seller contact the lender's appraiser to ask for a review of its findings. The seller's appraisal can also act as backup for the asking price for the home and could be a form of leverage during negotiations. In fact, giving a copy of the pre-sale appraisal to the lender's appraiser can be a smart move.
Chris tried to contact the lender's appraiser and even submitted documentation comparing the two appraisals and pointing out where the errors were. "If we hadn't had the market value analysis done before we listed the property, we would have had no documentation and no basis on which to dispute the lender's appraisal," he said.
Nevertheless, the lender declined to pursue a change in its appraisal and the buyer decided to move on. But Chris is still glad that he had his own independent appraisal up front. "A market value analysis by a qualified local appraiser before listing is worth every penny," he said.
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