Should home sellers get a prelisting appraisal? An argument can be made for and against; the critical variable in the mix is the real estate agent that is selected to list and market the home. If the agent is experienced and can effectively collect and apply data, then one might not be needed. Big if. That assumes of course, that the agent is going to candidly share this information with the seller, even if it is contrary to what they think. Not all do, but that is another discussion. It’s been said many times in many places, the single most important thing a home buyer or home seller can do is learn how to select the proper real estate agent.
Why home sellers should get a prelisting appraisal
- For an unbiased opinion of value. It’s not unusual for an agent to tell a home seller what they want to hear when it comes to price. The agent’s objective is to get a listing; it pays to play to the owner’s opinion. No listing, no paycheck. Some owners recognize this and want an impartial opinion of value.
- For use during negotiations. Having an appraisal in hand can support the seller during negotiation. The ability to introduce it as an impartial opinion of value can be the difference maker in negotiations.
- To support the buyer’s appraisal. What better counter to an appraisal below contract price than one that supports the contract price. Agents are often ineffective working with appraisers, having a current appraisal as support can avoid issues
Why home sellers should not get a prelisting appraisal
- Appraisals are opinions, buyers are the current market. Appraisers tend to look back at closed sales and less at current listings; they may be overly conservative in strong seller markets.
- Was it completed to underwriting standards? The appraiser for the lender has strict underwriting guidelines that must be followed. Prelisting appraisals are not subject that scrutiny and may not stand up under similar review.
- Does it matter? Why would a buyer assume a seller provided appraisal or home inspection is unbiased? The buyer is going to have a lender provided appraisal anyway – unless it’s a cash offer and even then, it’s wise to have an appraisal.
- If the listing agent was properly selected, it’s reasonable to assume they can present appropriate data to support their opinion of price. It’s further assumed that this agent understands how an appraiser looks at data and can effectively communicate that support. This is – unfortunately- a large assumption as many agents cannot. If not, consider getting an appraisal…or better yet, find another, more experienced agent.
$400-$500 for an appraisal along with a commission to an agent? Does the agent not have the ability to handle this aspect of the transaction? If not, what other aspects of the listing are they unable to handle?
The real estate market is in constant motion and a home seller’s most valuable asset is a full time, experienced agent. The idea that additional money has to be spent on a prelisting appraisal can be frustrating to sellers – and so can having a home that doesn’t sell, has appraisal issues or has to be reduced. In some cases, a low appraisal can stay with the home for up to six months even after the original buyer has moved on. It can get tricky which is why preparation is the key to success.
Hank Miller is both a certified appraiser as well as associate broker. Since 1989 he’s completed and reviewed 10,000+ appraisals and sold several hundred homes, his clients do not have price, negotiation or appraisal issues. The extended members of his team are full time professionals and cover every aspect of every transaction; there is no substitute for experience and attention to detail.