Should home sellers get a prelisting appraisal? An argument can be made for and against; many times an agent recommends one because they are incapable of or unwilling to render a supported opinion that is contrary to the seller’s idea of value. Some agents simply tell sellers what they want to hear just to secure a listing, no matter how unsupported the list price is. The first 30-45 days is the most critical part of a listing, if reductions begin a stigma can rapidly develop. This reinforces the importance of knowing how to qualify a real estate agent. Agents lean heavily on comparative market analysis (CMA) but those are woefully inadequate. A thorough analysis is much more detailed – see one here. So before paying for an appraisal consider if one is really necessary. It might be better to hire an appraiser as a consultant during the listing, not only can they provide solid listing price advice but they can meet the buyer’s appraiser on site with appropriate data in support of the seller.
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.
- If the home is unique and atypical, an appraisal may be beneficial. Homes like this typically require a very experienced agent that can effectively communicate with other agents and appraisers; an appraisal can help.
- 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 or mitigate 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 the appraisal 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.
- Is it objective and impartial? 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.
- Is it really required? Is it reasonable to assume the listing agent can present appropriate data to support their opinion of price? Shouldn’t the agent understand how an appraiser looks at data and effectively communicate with them? This is – unfortunately – a major assumption as many agents cannot.
Few agents have a genuine understanding of the appraisal industry. Sellers have started to hire appraisers as consultants; have them complete an appraisal and meet the buyer’s appraiser on site to limit the chance of appraisal issues.
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.
If you have questions or feel that an appraisal is required, please give us a call or use the contact form below and we’ll give you a call.
Hank Miller, SRA 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.