Home sellers may think they should get an appraisal from a professional real estate appraiser before listing a home for sale. Unless the property is so unique that the listing agent cannot prepare for an analysis of comparative market, paying for a full valuation might be overkill.
Varying Degrees of Professional Appraisers
Appraisers are like professionals in any other field. Some are great and some couldn’t find a property with two cards and a flashlight.
In some states, appraisers may not need to be licensed. Unless a salesperson has the first-hand experience with a particular appraiser, there’s no way to be completely confident that the appraisal will be accurate.
Real Estate Appraiser Errors
Evaluators can make mistakes. If the commercial real estate appraiser is unfamiliar with a neighborhood or its features that could affect the value, the appraisal may be incomplete. The method used by many appraisers to establish market value is to compare similar homes in a similar condition that have recently been sold. Sometimes agents remove photos after the Multiple Listing Service (MLS) closes.
If the appraiser did not see the interior of the home, the appraiser could unintentionally use a home for repair as a sale comparable to a renovated home.
Appraisals Using Realtor Information
Appraisers cannot always find all the data required and may ask realtors for information on their recent sales. Appraisers want to know if there was anything unusual about the house, if the seller paid the buyer’s closing costs, or if there were any special concessions. Not all real estate agents are available to answer these types of questions, and not all appraisers ask. The best producer agents may not remember the details of every transaction.
Even expert assessors will not always agree. Ask three appraisers for an opinion on value, and you’ll likely get three different opinions.
Buyers and Comparable Sales
Home pricing is both art and science. When real estate appraiser prepares a benchmarking analysis, they try to determine how much a buyer will pay for the home and the price at which the buyer from the lender will assess. These values can be two different digits.
Sometimes buyers are not very confident when buying a home. They usually compare the values between the homes they’ve visited. So they’re not sure how to determine the value when the only homes they see are homes for sale. They know what other sellers are asking for their homes. But they often don’t know which homes in the neighborhood have recently sold and for how much.
If they are getting comparable sales, buyers generally do not have enough valuation knowledge to know how to adjust house spreads.
Buyers can try to compare a house with a pool and improvements to a house on a smaller lot without a pool. And, in need of work and have absolutely no idea how to calculate the difference in monetary terms.
For example, a buyer can be told that the neighboring house sold for $300,000. That would be enough to make the buyer believe that he should be able to offer $300,000 for the house for sale next door. However, the house for sale next to that house could have an additional bedroom and bathroom. That would mean it could be worth more. How much is an extra bedroom and bathroom worth? Buyers don’t know
How Buyers Appraise Homes for Sale
Buyers often make a price decision based on competing homes for sale. If they visit an overpriced home, for example, reasonably priced homes will look like a bargain. They can also ask their real estate agent how much they should pay. And the agent might say, for example, that the average selling price/list price ratio is 98%, which might suggest a 2% price reduction.
Buyers shouldn’t ask a real estate appraiser how much to bid for a home. Most agents are uncomfortable suggesting an offer price because it is not their home. And, they may not be able to respond with confidence. A buyer should ask a real estate agent to give them enough information. So that the buyer can make an informed decision.
Reasons to Avoid Seller-Paid Appraisals
One of the main reasons that a seller-paid appraisal is likely to be a waste of money for the seller is that the buyer might not trust the nationwide property and appraisal services. Also, the buyer’s lender will definitely not accept the seller’s assessment.
The buyer will still have to pay a separate appraisal fee to obtain financing.4 In addition. The buyer’s lender is likely to need an additional appraisal, just prior to closing, to obtain financing. Verify the accuracy of the first assessment 5 after the 2008 stock market crash. Lenders realized that a good valuation was just a good estimate of value, and estimates can vary.6
While estimating a real estate agent’s value is not an appraisal. You should not be construed as such, listing agents can generally do a fairly good job of determining a listing price based on comparable sales. And market movement.