If you’re contemplating listing your home for sale, you may also be asking yourself if you should have your house pre-appraised. There is no matter-of-fact, right or wrong answer, but there are pros and cons you should carefully consider when deciding whether you should have your property pre-appraised, and why.
What is an Appraisal
By definition, an appraisal equates to an educated guess. That’s not to say appraisals don’t have benefits, but that they vary from one appraiser to the next. A professional in the real estate industry uses a combination of data and personal observation to formulate an opinion about the current market value of your property.
How Appraisals Work
A professional appraiser gathers information about your property from public records, such as location, the age of the property, the size of the house, and a comprehensive market analysis, or CMA, to compare your home to other properties in your area that are similar to yours that have recently sold.
With the information gathered and reviewed, the appraiser then personally inspects the property – from the land on which your house sits, to the structure – inside and out. The reviewer is considering how well the house has aged, the condition the home is in, upgrades that have been added, and other factors used to determine the current fair market value of the property.
Although there is data supporting the findings and a method for applying that data, much of an appraisal is open to personal influence. What this means is that you could ask three individual appraisers to assess your house and receive three different estimates.
Expiration Date of Your Appraisal
Another downside to having a house pre-appraised is that the real estate market is subject to shifts, trends, and changes that are as unpredictable and impactful as the weather. Some changes are favorable and increase property values while others are detrimental and can cause home values to plummet. So you may have your home pre-appraised today, but with no guarantee that tomorrow’s market will substantiate the estimate.
Why Do People get Pre-Appraisals
There are ample reasons you may choose to have your home pre-appraised before listing it for sale.
The first reason people choose to have their properties appraised before selling is to determine a fair asking price for their home. Sellers are required to set their own price, which can be more than a little challenging. Although sellers can take advantage of home valuation calculators, those calculations are far from accurate, lack the human factor for assessment of condition, and are only a starting point for discovering how to price a property to sell. You can back up that valuation with the pre-appraisal which incorporates the human factor.
Aside from learning what the current fair market value is for your house, you can also discover cheap upgrades, minor fix-it projects, and other ways you can increase the value of your house before you list.
Another reason people invest in pre-appraisals is to close the gap between the estimates of competing agents. If you’re interviewing agents and one suggests a selling price of $400,000 and another recommends no less than $800,000, one of those agents is severely off their mark. Such differences of opinion could mean that either one agent lacks expertise, or that an agent is potentially inflating the value in an attempt to win your service by implying a greater profit. The pre-appraisal can lend credence to the agent that is closest in their estimate of your home’s current value.
How a Pre-Appraisal Can Save You Money
Your pre-appraisal will cost you between $300 and $700, give or take. Because appraisers work in increments of $500, a handful of small issues could cost big bucks. For example, the appraiser may give you negative marks for things like rusty doorknobs, squeaky doors, cracked socket covers, torn window screens, chipped paint, and other little items. That handful of issues could cost you $500 in the overall value of your home. By making a small investment of money, time, and effort into repairing these areas, you can add that value back into your sales price, which could more than pay for the appraisal in the long run.
For Your Eyes Only
The pre-appraisal you order is only good for your review. You won’t be able to use that appraisal in place of the one requested by the buyer’s lender. You also won’t be able to use that assessment to prove to buyers that your house is worth what you’re asking because buyers often see those appraisals as biased. However, you can keep a few copies on hand during showings to use as a marketing tool.
Your Agent’s Expertise
The fact is that your real estate agent can probably do just as good of a job, if not better, than what an independent appraiser could do. While appraisers may lean on specific data and experience in assessing homes, real estate agents also have access to that same data, and also have experience in assessing homes to determine value. In fact, your agent may have more expertise in your area, or in the type of property you’re selling.
Your real estate agent, though, has ulterior motives. Real estate agents work on commission, so the higher the sales price on your home, the greater that agent’s paycheck will be. For this reason, the agent is more likely to start out on the high-end of pricing and work their way down by reducing the price one or more times if the house doesn’t sell within a certain time frame. A pre-appraisal could give you the information you need to be able to price your home fairly yet competitively.
It’s not necessary to get a pre-appraisal. In fact, a pre-appraisal has no true value to anyone other than you for peace of mind. However, you may find it more than worth the investment to have a non-biased, third-party opinion to help guide you in pricing your house to sell and find ways to increase the value of your home.
Call the The Laura Castillo Group at 432-701-0506 to discuss buying or selling your Midland home.