Don't Strike Out with Your Appraiser

It's no secret: Home values are governed by buyers, not sellers. A home is worth what a buyer will pay for it.

One of the best ways to discover what a buyer may be willing to pay for it is to have an appraisal done. Using comparable properties that have already sold, a good appraiser can give his educated opinion on what the property is worth on the market at that given time; that doesn't necessarily mean it's what a buyer will pay, but it's one of the closest ways we've got to get a reasonable price set. And no, you shouldn't be using homes presently on the market as your comparables - since they're still on the market, obviously they're not at a price point that a buyer will pay.

For many of my clients, I advise having an appraisal done on their home before we list it. Yes, it means the seller is paying out of pocket for it instead of waiting for one done for a closing. So why would I recommend this step?

1) Because an appraiser looks at comparable home sales in the area in order to come up with a value, it provides the seller a ballpark price for listing.

2) Because we provide the appraisal online for buyer agents, their clients know what a realistic offer would be and what the house is really worth, compared to similar properties in the area that have already sold.

3) Because it gives the seller backup documentation should the lender's appraiser comes back with an appraisal that totally misses the ball park.

Does #3 really happen? Oh, yes, it unfortunately does because there are idiots in every profession, including appraisers. Last evening I found out that one of my U/C listings was appraised at $60,000 less than the selling price! And $70,000 less than the appraisal done 3 months before! Had the house really depreciated so much in 3 months? I think not!

So I looked at the comparables this second appraiser used. Hmmm... nothing closer than 14 miles away! Some as far away as 30 miles away! In an area that has plenty of comparables within 2-5 miles! What was this guy thinking? Instead of a line drive, he hit a pop-up that bounced around the entire field, then he claimed a home run by filing it. So now the seller and buyer have to go through the aggravation and time to challenge the call.

Moral of the story: When you have an appraisal done on your home in order to sell it, make sure you get a heavy hitter: someone who is highly experienced, qualified and recommended. Because you never know when you'll have to use instant replay to determine who really scored at home plate.

Yours in smiles,  : )

Abbey

Posted at 01:03PM Nov 19, 2010 by Abbey Turner in Real Estate  |  Comments[0]