If you're close to listing your home for sale and are thinking about getting an appraisal before starting the whole process, there are some important things you should know prior to taking action. Getting an appraisal before listing can be helpful to some buyers, but they are not legally required or even necessary in many situations. Whether or not getting one is right for you will depend on some circumstances that will be unique to your situation.
Why Do Sellers Get Appraisals?
Since you're selling a home, it's very likely you've experienced some part of the appraisal process as a buyer. You know that lenders requests appraisals of properties during escrow to make sure the money they're lending is going toward something with appropriate value. If the loan defaults, they know they can cover the principal by selling the home. Sellers who get appraisals before listing don't have the same motives.
In most cases, sellers get appraisals before listing to get an accurate picture of what their home is worth. This may be needed when interviewing two or more real estate agents and they provide drastically different price points. Instead of trusting real estate agents who may have their own objectives in mind, you may want to get a figure from an impartial appraiser.
How Does an Appraisal Work?
Appraisals are carried out by licensed professionals who have expertise evaluating the value of homes. Unlike inspectors, appraisers are not likely to check the working condition of specific home features, but they will use an overall evaluation of your property to come up with an estimated selling price. Most appraisers since the market crash of 2008 are required to follow the Home Valuation Code of Conduct to prevent coordinating interests from artificially inflating the value of a home. You're not obligated to do anything with the information obtained from an appraiser.
The Advantages of a Pre-Listing Appraisal
Obtaining a home appraisal before you put a property up for sale can serve a variety of purposes. In most cases, sellers are unsure how much to initially price their home due to lack of information or infrequent home sales within the same neighborhood. With an appraisal, you'll have a better idea about what initial price for your home will maximize the price of bids. Getting a pre-listing appraisal can also:
- Increase confidence with buyers. When someone looks at your home and sees that you've already received an appraisal from a certified, trained professional, they'll have a lot more confidence placing a bid.
- Get you a more accurate value of your property. Realtors, lenders, and other parties are not obligated to provide an accurate estimate or price point for your home. Appraisers are liable for the valuations they give, so they use all the information they have available to come up with an accurate number.
- Give you more negotiating power. This can be especially helpful if you're planning a sale by owner. Without the negotiating expertise of a real estate agent on your side, you'll need every tool you have available to get the price you want.
A Few Reasons You May Not Want an Appraisal
There's plenty of real estate experts who say getting an appraisal before listing is worthwhile. There are also many who say the time and money invested in an appraisal simply isn't worth it. Here are some of the top reasons they have for discouraging pre-listing appraisals:
- Potential buyers and lenders won't care. Even if a buyer sees value in your appraisal, their lender will need to request an appraisal of their own before approving a loan.
- There's no such thing as perfect objectivity. Even if your appraiser is an expert in their field and completely thorough and honest, their valuation may not match, or even come close, to the final sale price of your home.
- Markets can change quickly. The period between a pre-listing appraisal and a sale can take as little as a few weeks or as long as a year or more depending on the nature of the market. During this time, appraisal values can change significantly, and your earlier appraisal can prove to be useless.
If you're still not sure whether getting an appraisal before listing is in your best interests, you may want to speak with an appraiser directly about any questions or concerns you may have. Unlike some other real estate professionals, they're likely to address most of your issues in an honest and straightforward manner. The more information you have, the more likely you are to make the best decision.