An appraisal and a pre-appraisal are not the same things. A pre-appraisal, sometimes called a listing appraisal, is something that you, as the seller, opt to order for personal purposes. An appraisal, however, is something required by the buyer’s lender to verify the fair market value of property. You can’t avoid the actual appraisal required by the lender, but the pre-appraisal is optional. Here’s what you need to know.
What is an Appraisal
Whether it’s a lender-required assessment or a seller-initiated service, an appraisal is the inspection of property for the sole purpose of determining its fair market value in the real estate industry.
How Do Appraisals Work?
Professional appraisers gather documentation about your house such as square footage, year built the builders, a comprehensive market analysis for comparison to other homes recently sold in the area, and other data. Once the appraiser reviews the data for a general understanding of the home’s elements, he or she will physically assess the property and the structure. During this portion of the assessment, the appraiser takes into consideration the condition of the land, the structure, and the fixtures within the structure. Based on the data and the home’s condition, the appraiser estimates a value for the property.
What can an Appraisal Do for Me?
An appraisal can help you gauge a fair price for the sale of your home. It can also help you discover problem areas, small repairs, tiny touch ups, and minor fix-it projects that can dramatically influence the value of your property.
Your appraisal can clearly define the accurate square footage of living space in your home. Since real estate is priced by the square foot, a mismeasurement in a land document or deed could negatively influence the fair market value of your house.
You cannot use a pre-appraisal as a way to impress buyers, but having a few copies on hand during showings may give buyers the nudge the need to submit an offer.
A Matter of Opinion
While it’s true that professional appraisers use some scientific methods to contribute to their findings, the true definition of an appraisal is that it’s an educated guess. In fact, you could ask three independent appraisers to assess the same property and discover they all submit different results.
My Agent Can Do That
Real estate agents aren’t considered appraisers by trade, but appraising homes is a part of their profession. The real estate agent has access to the exact same information the appraiser uses and may have more experience with assessing homes within a particular area or niche. So if your sole purpose for considering a pre-appraisal is to figure out how to price your home to sell, then you may be able to cut out the middleman and allow your agent to appraise your house.
A Difference of Opinion | When Agents are Wrong
Yes, your real estate agent can probably do a fine job of appraising your house, so you know how to price it competitively, but that’ if you have an agent with whom you’re already working. However, if you’re in the process of interviewing agents and their suggested home values differ enough to have you scratching your head, you can use a pre-appraisal to determine which agent was more accurate. Not only can this help you choose an agent who really seems to know their stuff, but it can also weed out agents who make wrongful implications to win your business.
The Unbiased Opinion
Your real estate agent, as honest as he or she may be, has ulterior motives in helping you price your home. Agents get paid based on commissions, which means their paycheck is a direct reflection of the selling price of your home. For this reason, an agent who is accurate in appraising the value of your home may suggest starting at the top of that price range and then work down through price reductions if the home, as its priced, doesn’t sell within a certain time frame.
Likewise, the lender’s appraiser is working for the lender and the buyer, not you. That’s not to say they falsify information, but that they’re not technically on your side.
Ordering a pre-appraisal from a third-party individual can give you an honest and objective opinion of your home’s true value.
The Cost of Pre-Appraisals
Having an appraiser come over to assess your house isn’t cheap. You can expect to spend anywhere from $300 to around $700, with some estimates being higher. In neighborhoods where the houses are all nearly identical, an appraisal might not be such an important thing to have. However, if your home is original with unique design style and features, then a pre-appraisal may be the most accurate way to find a way to price your home competitively.
Time is Not Your Friend
The real estate market shifts shimmies, flips, and flops based on market trends. Because there is no consistency in market values, an appraisal you obtain today may be completely off the mark by the time you list your house for sale. The appraiser doesn’t determine what your home is worth, the buyers in the market do. Your home, no matter how fairly priced, is only worth what buyers are willing to pay.
About the Pricing
The reason most people obtain a listing appraisal is to assist them in finding the best way to price their home for sale. Having a pre-appraisal is a great resource, but is not meant to stand alone as the final answer. In fact, it’s best to combine the pre-appraisal with other information, such as your real estate agent’s advice, online valuation calculators, and comprehensive market analysis reports. Armed with the information from all of these sources collectively, you’re able to confidently create a price that will assist your house to sell quickly, and for the highest price.
You’re not required to have your house pre-appraised before listing. You can find tools and resources to help you price your house without the use of an appraiser. Your real estate agent should be a great resource for you who can help you appraise your house without the added costs of an appraiser.