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Should I Have My House Appraised Prior To The Listing?

This is one of the most popular questions I get when meeting with sellers when they are preparing to put their homes on the market. The answer is, it depends.

Appraisals cost between $400 to $700 in our area. Most of the time your REALTOR'S® market analysis will provide you with much of the same information as an appraisal.

When an agent comes over to talk to you about selling your home, they will most likely, have a market analysis of the current market conditions in your neighborhood and the nearby surrounding areas. They will compare what homes, similar to yours, listed for and sold for in your area. An appraiser will potentially use the same information, but will go into more depth about each property.

So, how do you decide whether or not to have an appraisal done prior to listing your home?

If you live in a typical suburban neighborhood where the homes are similar in style and square footage, you probably don't need to have the home appraised prior to listing your home. The information on your REALTOR'S® market analysis should be current and give you a very good idea of the market value of your home. If you are still not sure, maybe you should talk to a couple of different agents and see that they are all in about the same price range, that should give you a good number for your home's value.

My advice to a seller would be that you should have a professional appraisal done prior to listing your home if you have a VERY unique property. Maybe something that is on the historical register or something that was built exclusively for you by an architect and there is not another similar home in the area. If you fit into one of these categories, I would strongly suggest pre-appraising your home.

If you do decide to have your home appraised prior to listing, hear me when I say that the appraised value is one person's opinion. If you hire 3 appraisers, you will probably get 3 different values. Just because one person's opinion of value is one number, the market value might be a different story. What someone is willing to pay for the house is the market value and what your home is ultimately worth. Don't let yourself get hung up on what an appraiser says your home is worth. If it takes time for your home to sell, other homes may come on the market and go to closing which will affect the value of your home.

The other thing that is important for you, a seller with appraisal in hand, to know is the appraisal you have is for your own knowledge. If a purchaser is placing financing on your home, the purchaser and the purchaser's lender will have their own appraisal.

The bank will most likely use an appraisal from an appraiser that is on the bank's approved appraiser list. They want to make sure that the buyer is not paying too much and that they are not lending too much money for a property.

Now with all of that said, Appraisals are very controversial these days with all of the new lending laws and guidelines. We have appraisers come from out of local areas doing appraisals and it is making the sales and loan process difficult. I think it is important for sellers to understand that the buyer's appraiser, in most cases, is going to be the appraisal that will be used for financing.

Ultimately it is up to you, if it you believe your home needs to be appraised before listing, you can do that. Just make sure you listen to your professional REALTOR® to tell you how much your home will sell for!!

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Posted by Audrey June-Forshey, GRI, Gaithersburg, MD on 09/11/2009 03:13 PM

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Originally posted at: Audrey's Adventures in Real Estate: Should I Have My House Appraised Prior To The Listing?

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61 Comments on Should I Have My House Appraised Prior To The Listing?

SEP

Audrey, one thing that makes this such an interesting question to answer is - when the appraisal is done after the home is sold, the appraiser has the contract amount when he goes out for the actual appraisal. Pre-listing appraisals, it could be a total crap shoot, at least if the neighborhood is architecturally diverse.

I think an agents opinion should be good enough if they do the job right on their CMA. I would only get the appraisal done when there is a contract on the home, if it is not up to par you can use your CMA to get it taken care of.

Pat, I have a seller who has an appraisal on his house and he wants it to be law. I have tried to tell him that it is one person's opinion of value. Ultimately the bank decides!!

I have had appraisers tell me that the banks are not giving them the contracts so I make sure I give them a copy with my comps.

BTW, I will be in OC for a small Rebarcamp Sunday night. Are you going? Gawd, tape your keys to your shirt!! LOL!

I Net I agree. I think the information is so similar. If the agent has any experience, then they should be fine.

In my opinion the appraised value is only of interest to the buyers and their lender. All theat matters when selling is the market value and that is only what someone is willing to pay for any given home. A good CMA is usually more than enough to get the house listed.

Audrey,

Good luck. You hit it dead on when you said that an appraisal is one person's opinion of value.

Rich

That pre-appraisal always seems to be a double-edged sword, doesn't it? So far, I've avoided recommending one. A good agent is familiar with the solds but also with the current inventory at a much deeper level than an appraiser simply because they've heard firsthand the feedback from their buyers as they showed each unique home. It takes working with a lot of buyers before you develop a kind of "sixth sense" of the value of a unique property. It's similar to the level you reach when you can walk into almost any house and guess the square footage within a few feet.

I've had people advertise "appraisal done" and it's a 5 month old listing -- doesn't matter a hill of beans, but they might have thought they could get that price "with" the appraisal. Of course the house was not SOLD at the appraisal value of 5 months prior.

Hi Audrey -- Great topic and I totally agree. There should be enough information and analysis to arrive at a reasonable (and perhaps changing) conclusion.

I have never heard of a seller needing an appraisal prior to listing. I live in a community of nothing but unique homes and we Realtors assign value via the CMA process.

I have had some sellers conctact me AFTER an appraisal was done. Let me tell you, I didn't take one of the listings. The appraisal was about 15k higher than what I knew I could sell it for. They went with another agent and I saw that house sit on the market for 9 months with 2 different Realtors before it was withdrawn. So beware! Great topic

Audrey, I agree with you. Appraisals would be beneficial if the homes are unique such as designed by an architect, designated as historic, or sit on a significant amount of acreage. In the end, the bank appraisal performed as part of the loan process is what counts. Even if a home were appraised prior to listing at $300,000, for example, there is no guarantee that the local real estate market would necessarily support that price. Buyers are influenced by emotion, rather than mortar and bricks. Such intangible factors such as perceived status, security, schools, etc. influence how much a particular buyer is willing to pay for a particular property. Since an appraisal is one person's opinion of th fair market value of a home, then, as you say, multiple appraisals tend to yield diverse results.

I have the feeling that appraisals can become an issue in the current market plus how appraisals appear to being done w/the new "rules". Why does/would the seller want an appraisal before the contract. Your up-to-date CMA should have given her the info she needed --no?? It's definitely true that an appraisal is only one persons opinion, BUT, they sure can wreck havoc to a Contract!

Sue of Robin and Sue

We think in our market a pre-appraisal is pretty much a waste of money. Its the one after an offer comes in that matters.

In our market, we are currently having a lot of appraisals come in below sales price, so I think that sellers may be wise to get an appraisal up front.

That "one person's opinion of value" is something that is hard for sellers to get over... unless they think it is too low... then they are quite quick to set it aside.

Audrey - well it does provide another data point, with a different perspective. But if the agent truly know the market and really does their job it may not be needed except in the case of highly unique properties. Given how appraisals are happening today one would want to think about this long and hard, IMO.

Jeff

In our area where we have a huge VA market and a decent FHA market, getting an appraisal up front can give you a general ideal, also you will likely have to buy a second one as you would only get a conventional and if you sell VA or FHA, these have to have a case number assigned and if you could get a different appraiser.

A colleague of mine in the other office had a client - well, two actually, as it was an estate - who ordered an appraisal at the same time that they hired her as their realtor, and the appraisal came in at the same price as her CMA. They all figured that having that ammunition in hand would help ward off any lowball offers.

SEP

Audrey, I have wrestled with this question and there is no right answer. There are pros and cons.

If the seller has an appraisal and a subsequent appraisal comes in lower from a bank you risk the possibility the seller will dig in his heels.

In my market since HVCC the appraiser does not get a copy of the sales contract. We are not permitted to make contact with the appraiser. Many appraisers wil not accept our comps or CMA's. Under the HVCC second appraisals are not permitted.

I agree it might help with a unique property. The seller has to understand 3 people can appraise the property and come up with 3 different valuations.

Hmmm. In our Sacramento real estate market I don't see how that would help. I have a file I am working on now where I was forced to order 2 appraisals for an FHA borrower because of the title seasoning of the current owner. Each appraiser came up with 2 values and used pretty much the same comps but each appraiser used different adjustments.

I think it would be a complete waste of cash for the seller. Just my opinion. I think it is the agents job to pull comps and be the professional when determining listing price.

Interesting. I know a listing , a good lisitng, in McLean that was put on the market for a little less than seven figures although the owner was pushing to "clear" a million - and then appraised at 100,00 less. Would it have helped that owner? I don't know.

Audrey, I have had one or two of my sellers get an appraisal for their property before listing. Yes I have access to ALL The data, but if it is a UNIQUE home, with no comps, we want to see what an appraisal will show.

By unique I mean timberframe house in the boon docks in a lower price area, but 5000 S. F.

Very rare to do one, but in this case I had the sellers get one.

There isn't anything too appealing about this business right now (to me) except for the marketing/Social Media/writing/photograph aspects. Appraisals are a problem everywhere right now.

Audrey... you bring up some very good points. I think, as you mentioned, if it's an unique property, to get an appraisal done. Besides, one of the biggest things to remember is that it is an opinion of an appraiser. I have been getting into arguments and discussions with some realtors and loan officers, about when a house might under appraise. And many answers are, "not to buy above", and I so disagree with that advice. There are too many factors to take into consideration. One of them, as you stated, that appraisals could come in at different amounts. But that is a whole other topic by itself. Overall, you did a god job of explaining some issues here that sellers and buyers need to pay attention about. PS... good to see you around. Hope all is well.

jeff belonger

I had an appraisal done prior to listing recently because it was a unique property. It's in a very desirable neighborhood and school district. The lot is 3 times the size of the average lot. Downside of property is that it is only a 2 bedroom and has no garage.

Typically, we will order a square footage only appraisal prior to listing ($75) if we think the court-house records are off - which they usually are.

Hi Everyone, Wow, what a surprise to get a feature and have all of these comments!! Thank you to all of you. I am running out the door for appointments, so I won't answer all of them right now.

I do agree with the majority of you that our CMA should be enough information to establish the list price. However, I am talking about unique propeties as we all have stated above and the problem for the buyer and the seller. Mostly I want to explain to sellers that just because you have an appraisal in hand doesn't mean that it is the last word in regard to value, there are many other factors involved.

Thanks everyone, will be back to address comments.

We have a lot of custom homes on property that i would recommend this for - you are totally correct. But for a normal tract home, which we also have a lot of, comps from the MLS should suffice. It's important that as agents we remember that most of the lenders are only looking back 60-90 days in their appraisals bo don't run comps from last year...

Every now and then, I get a listing opportunity that I just can't price(or the owner's opinion is way out there). At such time,I will ask the Seller to get the house appraised and credit some $$$ back at(if) settlement. Not that anything works ALL of the time, I will use the appraisal to nego with Buyer's agent.

I live in one of those "ard to appraise: houses and every time I have needed to appraise it, it has created an issue. Usually the bank itself will order more than one appraisal.

Houses surrounding it are far larger, far newer, on much smaller lots etc.....(mine was the original ranch house)

I believe real estate agent are FAR better judges of what a property will sell for that is unique in nature.

Why the market value can be such a different number than the appraised value is a serious flaw in our industry.

Actually, under HVCC, an agent can talk to the appraiser. It's the lender who can't.

The ones I love, though, are the sellers who say, "But I refinanced a year ago, and my home appraised at XYZ." Which has absolutely no bearing on today's market.

Sellers and buyers seem to think that an appraisal is etched in gold but it's not. As you so aptly point out, 3 different appraisers will come up with 3 different values. It's just an opinion and, quite frankly, some opinons are better than others, LOL.

We used to get appraisals at the time of listing in order to expedite closings for our military buyers using a VA loan (appraisal good for six months). With the changes HVCC brought about, the VA valuation office actually advised us to not do that anymore. They advised us to wait until we have a buyer. An appraiser with a contract in hand is more likely to come in near value instead of stabbing in the dark on a "John Doe" appraisal. That being said, we have also been having appraisals come in low - especially when performed by appraisers from out of the immediate Fort Hood area.

Morning Audrey, It is also worth pointing out that appraisals definitely have a " shelf life " ! The market may not support a dated appraisal( in either direction ) after 3- 6 months !

Audrey - It's Christianne. I'm on the ship! We just left Venice. Lori mentioned you got a contract on the house! Congrats on the feature article and I will catch up with you on the 20th when I am back on the good ole' US of A!

A thorough CMA will do. The appraisal won’t matter to a buyer’s lender because they will need to get their own … and if there is a difference in the two appraisals … the buyer’s appraisal is the one that matters.

We tried that some years ago but it did not help much as a new appraisal is needed anyway. I would rather have my sellers spend the money on sprucing up, curb appeal or staging. Much more effective, imho! Thanks for the conversation!

Hi Audrey~ I have had a seller do an appraisal before a listing. It turns out the house sold for a whole lot less than what it appraised for. It was all the market would yield!

Well written! I re-blogged this.

It is hard to explain to a seller why their months-old appraisal does NOT matter now, 5 months later. So you risk getting an appraisal now, having the house sit, and not be valid later.

But I like this idea! I work with a lot of trusts and estates, who are required to get appraisals before I list. One vendor I have asks me for the CMA before she divulges the appraisal value... and I am happy to say I am almost always right on the money.

Audrey - A majority of the homes I list are in a "typical suburban neighborhood," so I've never been asked about getting an appraisal done prior to the listing. However you made a great point when it comes to "unique" proeprties.

Properties that may need an appraisal to establish a price such as unusual architectural homes will not necessarily sell. A local home, appraised at over $4million, still on the market at $1.9million. Why because it is so unique. So what good did the appraisal do? Gave the seller false expectation? Of course an appraisal will not tell the seller how long they may have to wait for a sale either. My opinion is the appraisal was a waste of the money spent. Most Realtors even without good comps will get pricing right over 90% of the time, provided it is their market.

While I see both sides to the story, I would tend to wait in this market and see what happend.

You could always have one done if you so chose.

Patricia Aulson/portsmouth nh homes

Unique properties benefit from appraisals, particularly when the appraisal is done by a respected appraiser in the area.

I wouldn't recommend getting a pre-listing appraiser. The lender may not accept it, market conditions may change, potential buyers do not need to rely on it etc.

Great comments. This a good topic. I have had appraisals done before on unique properties or land. In this market, the appraisals, as some said, are only a "guess" and do not have a long shelf life. The biggest problem in my market is the buyer and seller may agree on the price and it doesn't appraise. I do the most thorough CMA I can do. I use square footage and even look at what's contingent to estimate what kind of sale prices will be part of the comps in the next 30 days. I also have started asking for "pencil appraisals" and so far I have not been charged, but it is worth paying for a pencil appraisal if you just can't convince the parties. Ask the buyer's mortgage broker to have his appraiser to a pencil appraisal. I find that most of the time my CMAs and the appraiser's guess is very close. Good luck to all with APPRAISALS..........

Most appraisals I've ever seen have by-in-large contained many, if not most, the comps I used when listing the property.

If you're confident about your price - and can prove it - why go through the extra expense?

Audrey,

Solid discussion on the important topic for a potential seller. Frankly, it doesn't seem necessary as long as the real estate agent has prepared a thorough CMA.

Audrey, this could be a great problem. It really is one person's opinion, same as our price opinions are. I have someone who wants to list their house for an amount it appraised for for a refi in May. We'll be very lucky if we were to get that amount!!!! Refi appraisals and contract appraisals are different. Plus, if the appraiser doesn't have a price to aim for, it could be a crap shoot! Good luck! See you tomorrow at REBCOCMD!

althought sometimes the appraisal can be a double edge sword its one of the evils of the game, and you did a great job on the blog, very informative

Hey Marney, I am excited to see you tomorrow @ REBCOCMD!! I agree about the refi appraisal and have had sellers say the same thing. I have told my sellers those are two different animals anyways and it doesn't matter.

Esko, Thank and I agree a good CMA should be enough.

Larry, I agree. I always meet the appraiser and give them my comps anyway. I am talking more about the sellers thinking they should appraise their home before listing their home.

Diane, Ditto what you said.

Marc, I am not talking about having an appraisal done fo the buyer, just the seller's info.

Sharon, so true a respected appraiser is a must.

Patricia, that is probably the smart thing to do.

Erica, Thanks, that means a lot coming from you. Good for you for knowing your market so well.

Vickie, I think that is the point I am trying to make to the seller, don't get hung up on that "magic number" from the appraiser, the market might be a totally different thing,

David, I think you hit the nail on the head.

Kathleen, I think that is the point I make in the post.

Hi Christianne!! I am so jealous I am not with you guys!! Can't wait to hear all about it. Yes a contract, now get through our inspections. *fingers crossed*

Corrine, I agree that is why I said to listen to your REALTOR(R) with regard to what the house will sell for. Some people shouldn't make a home too unique because that usually means no one else is going to want t buy it, might just be too weird.

Michelle, That is very much the same as my business for the most part. Sometimes we do come upon a unique property.

Bill, that is a perfect term, "shelf life" I should have had it in my post.

Gene, it is a double edged sword. Thank you for the compliment.

Mary Ann, that is interesting that you automatically did that to expedite the deal on VA contracts. We have always waited for contracts. Agreed that with all the problems we might as well wait until contract.

Thank you Elizabeth. True the seller thinks that number is in stone.

Janet, I think the agent is really the best bet, they are out there in the trenches and know what the buyers are interested in.

Michael, I think that is a great scenario. You don't do it all the time, just some of the unique situations. Nothing works everytime is true.

Stacy, I think that the danger of a seller getting an appraisal is that they don't understand that the appraisal has a shelf life.

Lori, I think that is the perfect example of a seller who needs an appraisal prior to listing.

Jeff, Thank you, That means a lot coming from you. Going to OC MD tomorrow. Are you going?

Susie, Amen. I have had them kill more deals lately.

Missy, Ditto exactly what you said. Just tried to write this for a seller thinking about hiring an appraiser.

Michael, Maybe it might have helped maybe not. Maybe they should have just listened to their agent in the first place.

Bonnie, I hear you. This was the point I was trying to make to the seller, not wanting them to dig their heels in but if they have a unique property, it could be helpful.

William, I think that could be a help if there was a low offer?

Roland, yes that is right - good point.

Jeff, I agree. I just live in the land of "I know way more than the real estate agent does" maybe the appraiser could confirm numbers the agent comes up with as well. It is very rare that I would suggest having an appraisal done for a listing.

Lane, LOL! So true, if the number is not what the seller wants to hear then it won't really matter.

Sybil, the appraisal will only be for the sellers information, I don't believe it can be used by the buyer in all instances.

Sue, they can make a mess of things, but again, if a property is unique, then it might be helpful.

Roseann, that is exactly my point Thanks!

Tim, LOL, see there is the seller that thinks what the appraiser says is law. They should listen to the agent!! Good for you.

Deborah, wow, never? Interesting.

Chris, I think most people will go off of the CMA, just sometimes you have different points of view.

Carla, I hear you. I have had sellers think the appraisal was the last word and just like you said, not so. They expire and some sellers don't get that.

Dianne, it is a double edge sword. I think you are absolutely right. Ultimately it is the market that determines the value.

Hi My friend Rich! Thank you.

Mark, Agreed. Thank you for stopping by.

Audrey, Congratulations on that little gold star! Very well deserved. I agree with your post. We do have so much info from the MLS that it isn't necessary most times. I have had to order a few over the years. One was a log cabin, and another was an older home in a neighborhood with NO comps. Drove me nuts trying to comp it out, so we ordered an appraisal.

You hit the nail on the head about appraisers all getting different values. I had a sale a few weeks ago and the sellers had just had the home appraised. My buyers lender had an appraisal as well (of course), which came in quite a bit lower.

I know this is off on a different tangent, but I am having most of my homes measured by an appraiser now. I've had a few instances lately where the square footage has been off (I had the buyer) and I don't want to risk being on that end of the deal :)

Have a great week girlfriend!!!

Elizabeth, Great minds think alike. Most of the time we don't need them, but sometimes we do. However, if a seller does get an appraisal, it is not the last word on value and I worry that some sellers will get stuck on that.

Hi Audrey! Great, thought-provoking post and it's interesting to see that the vast majority never do use one as I know agents here that set their prices by them! I do not--I'm with the majority of your commentors--only use a pre-appraisal for a unique property that I've racked my brain trying to find comparales and finally gave up and let the expert do one! Funny but, with one, we got the original appraised price and the second one came in very close--they used the same properties! It's so highly subjective though, why waste the $$ doing it when the bank is going to do one for the buyer anyway?!

Congrats on that little gold star!

I really think it depends on where you are and the circumstances of your market. I'm 30 miles south of a Nashville and 4 miles from one of its suburbs (Franklin, TN) in a very desirable small town (Leipers Fork, TN). 2-3 years ago, we had plenty of data to provide a CMA that would come out very close to the price of an appraisal. In fact, I could often do some quick figuring off the top of my head and come out pretty close. Now, however, there has not been enough sales data (in my little area) to provide accurate information. There's just not enough homes selling to pull any comps whatsoever. Just last week I was doing an Absorption Rate Study for a higher end home with land. There were 9 active listings, 1 sold in the past 6 months. That was just within the price range (I hadn't even started to look at comparable features!) It's my opinion that Realtors providing CMA's when they should be doing an absorption rate study or recommending an appraisal is why so many homes around here don't sell quickly (or at all). The homes are way overpriced and just sit. I use appraisals as ammo to help my new expired seller's understand that their last Realtor may have been "buying" the listing or was just mistaken. I also agree to lower my commission by the price of the appraisal when clients are willing to do one (assuming they are willing to price it at or below that appraisal). Not to mention, when people still believe they should be getting more than what they paid for their home 2 and 3 years ago, it's nice to have someone else there to be the bad guy.

SEP

Good post and commentary. I think Realtors internet marketing is great but people

are getting way to caught up with it and think that if you

are great at blogging and marketing…the $$ just rolls in.

Here the problem with a pre-listing appraisal is that there are only about four or five companies in town that do them, with a total of about 10 actual appraisers. Some areas, only one appraiser work in, so having a prelisting appraisal is definitely NOT a good idea.

SEP

Audrey,

I chuckled to myself when you said about 3 different appraisals with three different values. When I worked in corporate relocation and properties went into inventory before the buyout there were several methods used to determine value. Sometimes it would be a few appraisals and one or two bpo's. And of course they were not always the same value.

Appraisal is also an educated estimate.

Audrey,

Appraisal is also an educated estimate.

Audrey,

Appraisal is also an educated estimate.

SEP

Congrats on the feature Audrey! I didn't notice that before. Great bunch of comments you inspired.

Audrey: A well deserved gold star. Appraisals are definitely a waste of money in cookie cutter communities when a similar home sells twice or more a month.

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