Pre-Listing Appraisal – Do You Need One?
You’re thinking about selling your home but you don’t know how much it is worth. You can jump on Zillow and Trulia, but how reliable are they? Check out my blog article Is Zillow’s zestimate accurate? One home was up to 32% off the mark.
If you live in a large apartment complex and there are 3 recent sales of the same model in similar condition to your model, you probably have a good idea of the value and don’t need a pre-listing appraisal. Like most areas in central and northern NJ, there is a diverse amount of home styles, ages, and condition making you possibly scratch your head when it comes time to figuring out the value of your home.
Zillow and Trulia have their algorithms but they don’t have eyes to see renovations in properties or if a property is dated. Realtors have CMA’s (Comparative Market Analysis) where they can select comparable properties and provide what they feel would be a good list price, however they are not qualified to make quantitative adjustments in their analysis. I’m all for hiring a realtor as they provide a valuable service, but it is possible for two realtors to give totally different opinions on what they would list the home at. One may come in high to leave room to negotiate and one low to draw attention and create a bidding war.
A licensed real estate appraiser is the only professional qualified to use the Sales Comparison Approach. In this approach, an appraiser makes quantitative adjustments to the selected comparables based on differing features from the home being appraised. For example, if your home has 2 full bathrooms and the comparable property has one full bathroom and one powder room, the appraiser may make an adjustment of $2,500 or $5,000 depending on the area and quality for this difference. This will narrow down the range of value and the appraiser can reconcile an unbiased opinion of fair market value.
5 things to know about a pre-listing home appraisal
It will be an unbiased opinion of fair market value of the home.
Home sellers can use the report as a negotiating tool.
The only parties who need to know about the pre-listing appraisal is the appraiser and owner.
Not getting one can be a costly mistake if you offer the home for too little.
The Sales Comparison Approach is used to accurately determine the fair market value.
Why a pre-listing home appraisal can help in a bidding war?
If you are in the fortunate position where there are multiple bids on your home, having a pre-listing appraisal can place you in a good position. Here’s why – let’s say the pre-listing appraisal came in at a value of $500,000. The highest buyer offers $560,000. If those buyer’s need an appraised value for the full amount for their mortgage, it’s likely the bank’s appraiser will come in around the $500,000 value of the pre-listing appraisal. This puts you, as the seller in a stronger position knowing to ask them that if the bank appraisal comes in short, do they have the funds and are they willing to cover the difference. If they don’t or are not willing, perhaps you take the second highest offer at $545,000 where those buyers are willing to make up the difference. This way you know how to choose the strongest buyer without wasting time down the road as selling real estate can be time sensitive.
What if the bank’s appraiser comes in low?
Let’s say the bank’s appraisal comes in at $485,000. If the buyer needs an appraisal and the bank’s appraiser comes in at a low value, you can use information from the pre-listing appraisal report to dispute the bank appraiser’s report. The bank’s appraiser will review that information and act accordingly, potentially revising their report if they deem it appropriate.
Your home is one of the largest investments you make in life. Having peace of mind and making sure that you sell your home for the correct value is worth the small fee of a pre-listing appraisal. Give us a call at 908-233-1337 for more details.