If you or a client is considering the sale of a residential property, a pre-listing appraisal might prove to be much more valuable than the cost of actually having one done!
The pre-listing appraisal can be useful for a variety of reasons but, at the end of the day, it comes down to pricing your home right! Not too high and not too low.
Pricing residential property right!
These are some thoughts on pricing a residential property correctly as well as about the critical importance of working with a broker who you can trust!
- It doesn’t matter what your house was worth in 2006, 2009 or 2013,
- It doesn’t really matter what Zillow says that it’s worth,
- Residential real estate is a market in the same way that any commodity is. Each house on a block may have different bells and whistles but a neighborhood is still a neighborhood and will typically have a range for value.
- Your house is only worth what someone is willing to pay so that listing it above that number will likely not work to your advantage.
- If you interview four real estate brokers and three suggest that you price your house in the $600K to $625K range while a fourth goes along with the price you think it’s worth ($725K), using the fourth will likely be a mistake. Typically after a month or so on the market with few lookers and no offers they will suggest lowering the price to the range it should actually have been in from the start,
- By the same token if the fourth broker in the example above came in with a suggested listing price of $550,000, that’s also a reason to run for the hills! What they are looking for is a quick sale that will benefit them while potentially taking money out of your pocket,
- Regarding the prior bullet point you may be saying to yourself that underpricing a home is also taking money out of the brokers pocket in the form of a lower commission. While that’s true, a quicker sale will result in less out of pocket marketing expenses for the broker and the reality is that the $50,000 means much more to the seller than the broker. Here’s what I mean:
Assuming that the total commission is 4% and the broker selling it is co-brokering, that means that their commission (or the commission to the firm they work for) will actually be 2%,
2% of $50,000 ($600,000 – $550,000) = $1,000
2% of $550,000 (the lower price) = $11,000
2% of $600,000 (the correct price) = $12,000
For the broker more interested in a quick sale than a sale at the correct price, in the example above they will be ‘losing’ $1,000, less the amount they share with their firm. The seller on-the-other-hand would be foregoing $49,000!
- Buyers today are smart and use the internet to comb through the available inventory. Find a broker you can trust and list your house at a price that makes sense.
- If your house really is the gem you think that it is you will have price wars in your driveway and get above your asking price anyway!
If you are a broker or residential property owner with a listing story to tell, leave it in the comments below.
The Pre-Listing Appraisal: Do You Really Need One?
I am fortunate to know Marc Powell, owner of All Points Appraisal, who has done work for me and who I have heard highly praised in the testimonials from many.
These are his thoughts…
‘So you’ve decided to list your home for sale. If you are like most people your home is your biggest investment and most valuable asset. You may have spent much time and money improving and maintaining your home. The decision to list your home for sale may have been an emotional one, but the list price itself needs to be based on facts. List too low and you may sell quickly but you might be losing money. List too high and you may sit for months going unsold.
If you are a typically motivated seller and you expose your home on the open market to typically motivated buyers, your home should sell at “Market Value”. This is the most likely selling price based upon recent sales of similar homes in your neighborhood. An appraiser is an expert at determining market value.
You may plan on using the services of a local realtor. They should have extensive first-hand knowledge of the market in your neighborhood. Remember, a realtor’s compensation is directly related to if and how much your home sells for. A local appraiser also has extensive knowledge of the market area: in addition they also know current lending guidelines regarding appraisals. Most buyers will be taking a mortgage in order to complete the purchase. Lenders have very specific rules regarding the comparable sales which can be use in a report. Realtors are not always aware of these guidelines. If your buyer is applying for an FHA insured loan there are additional guidelines regarding the physical condition of your property as well. An FHA approved appraiser can make you aware of any defects which need to be corrected prior to listing your home. This will help eliminate the chances of the deal falling through.
By using the services of a licensed or certified local appraiser you will be getting an impartial professional opinion of your homes condition and current market value. They will have first-hand knowledge of current lending guidelines and can take them into consideration when researching and completing your appraisal.
Many people are surprised when they find out their home is worth much more than they estimated, allowing them to list higher than planned. Some owners have an over inflated vision of what their value is and an accurate appraisal helped them to realistically price their home for sale
A small investment up front may save you a lot of time and money going forward!‘
Marc Powell (allpoints@optonline.net) is a Certified Residential Appraiser with 25 years of experience in the NYC/Long Island market. His company –All Points Appraisal covers Nassau, Suffolk, Queens and Brooklyn specializing in 1-4 Family homes, Co-ops, Condos and Mixed-Use properties. They provide appraisals for Mortgage Lending, Estate Settlement/Planning, Matrimony, Bankruptcy, etc.
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Article by Michael Haltman, President of Hallmark Abstract Service in New York.
HAS is a provider of title insurance in New York State for residential and commercial real estate transactions.
Learn more about Hallmark Abstract by watching our whiteboard animation here.
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