Do You Need A Pre-Listing Appraisal?
You’re ready to sell your home. So shouldn’t you get an appraisal so you know the value of your house? That seems logical, but the answer might surprise you. Actually most homes do not need a pre-listing appraisal and in fact it could give you bad information which could cost you thousands of dollars.
Let’s talk first about an appraisal, how it’s done and what it means. An appraiser for an existing home looks at recent sales in your area and compares them to your home. They will add or subtract for different upgrades, locations, views, size and other factors and then arrive at a value. Because they can only take closed sales, depending on the time of year you get the appraisal, it might or might not help you price your home for sale.
For instance, historically home prices are lower during the late fall and holiday season. If you are hoping to take advantage of the renewed activity in January, an appraisal which only uses sales from December could be lower than current list prices. The reverse could be true if you are listing in the fall and the recent sales are still at summer prices.
When you contact a real estate agent about possibly selling your home, they will present you with a Comparative Market Analysis (CMA). The CMA is used to help homeowners understand their real estate market. They compare not only the closed sales, but active listings and pending sales as well. Your agent has experience with your area and can talk with you about the direction of the market and how your property will fit into the mix.
So are you saying that an appraisal is always a bad idea?
Not at all. There are situations when an appraisal could be very useful. Custom homes and luxury homes where finding comparable properties can be difficult can benefit from an appraisal. If your home is unique in your community, then the appraisal can help you and your potential buyers see the enhanced value your property offers.
Another situation is when you are using an auction or bid process to sell your home. An auction/bid process is still relatively rare but it involves buyers writing offers with little to no contingencies. The home is available to see only one or two times and at that time an appraisal and home inspection are available for potential buyers to review. They then write offers without these contingencies.
An appraisal only looks backwards in time, you and your agent want to look forward. You need to choose a list price that fits the market as it appears today. Before you order an appraisal which might or might not be relevant, talk with your agent and get some initial information. Based on the CMA and conversation with your agent, you may find that it’s unnecessary to pay for that appraisal before you list your home.
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