How Much is Enough?

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Price your home incorrectly and it could mean a long stay on the market, a final selling price lower than what the house is worth or both.

“That’s why some homeowners are electing to pay $300 to $400 for an appraisal before putting their homes on the market.” said Alan Hummel, past president of the Appraisal Institute and chief appraiser for St. Paul, Minn.-based Forsythe Appraisals LLC.

Pre-sale consultations at the firm rose in the first quarter, he said, as the residential real estate market started to cool in many areas of the country and inventory increased.

Although real estate agents often do their own market analysis to price a property—and many times do a decent job—the appraiser can come in with an independent, unbiased opinion to make sure the price is right, Hummel said. In fact, if a property isn’t getting any serious lookers, an agent might even encourage his or her client to invest in the service for a second pricing opinion, he added.

The greater attention to precise pricing is a change from a couple of years ago, when a house could be listed at a lofty price just to see how much it would fetch, he said. “Now you’ve got to be competitive and you have to know that the offers coming in are reasonable.”

Also, if a property spends too much time on the market, the price it will be able to command often decreases, he said, as some buyers will question the reasons for the property’s inability to sell.

Appraisers Look Through the Eyes the Buyer

“An appraisal will look at the home from a visual standpoint, taking into account considerations from the proximity to schools to cracking or flaking paint,” Hummel said. “allowing the seller to try reacting as a typical purchaser would.”

The appraisal also will analyze the health of the local real estate market, giving homeowners more personalized expectations for selling their home—a feature especially important with the plethora of national news stories generalizing the real estate market, Hummel pointed out.

Appraisers can also use a cost approach, which will determine the price tag on a new home built to the same specifications of the existing home, Hummel said. The comparison can be helpful for newer houses hitting the market because it lets sellers know what their home is competing with on the new-construction front.

Looking Back — Moving Forward

“It not be a bad idea to dig through your filing cabinet for the appraisal report you paid for when you first bought your home.” said Michael H. Evans, president of Evans Appraisal Service Inc. in Chico, Calif., and a fellow of the American Society of Appraisers.

“People tend to procrastinate when it comes time spending some time reviewing the paperwork because often the seller is also a buyer and focus their priorities and interests primarily on buying another house in another neighborhood,” he said. “They don’t go back and review the paperwork unless there’s a significant issue that needs to be addressed.”

Doing so, however, can remind homeowners of flaws found they discovered after their first time around merry-go-round, and sellers might want to address the curable problems long before hitting the market.

Four Important Points You Should Know

Here are four important nuggets of appraisal insight provided to us through the courtesy of the American Society of Appraisers as to what should be included in your appraisal report include:

1 — Appraisal Contents

It can range in length, many being from two or three pages to as much as a hundred pages or more, depending on its scope. They should  include:

•   Details about the house,
•   A description of the neighborhood,

•   A side-by-side comparisons of similar properties,
•   An evaluation of the area’s real estate market, 
•   Any notations of any major problems with the property that will affect its value, and
•   An estimate of the expected time it will take to sell the property.

2 — How a Home Appraisal is Created

Appraisals are opinions on the value of residential real estate for the sole purpose of comparing the value of your home to similar homes in the area that had previously been sold, or are currently up for sale. Remember, an appraisal is NOT the same as a home inspection. Inspections look for physical imperfections in the home, making sure it is structurally sound and so forth.

3 — Getting Your Copy of the Appraisal

You paid for an appraisal when you bought your house. If you didn’t request a copy of the appraisal at the time, you can request it from your lender—it’s your legal right under federal law.  Then once you have secured your copy of the report, look at it and focus on:

•   Items That Had a Negative Adjustment on the Previous Seller—as they may provide you with a good checklist for the elements of the property that may need to be updating or remodeling.  

•   Issues That May Have a Negative Impact Adjustment — like less than the typical number of baths in regards to the size of the house,’s size, outdated kitchens and baths, or a one-car garage or no garage in a neighborhood where two and three car garages are standard.

4 — Appraise Before Your Home Hits the Market

Always a wise choice, as the new appraisal will help accurately determine a price at which to sell the home and ensure that when the buyer’s eventual appraisal is completed, providing you a valuable guide at the negotiating table regarding your asking price before an offer is accepted. Sellers are sometimes shocked when their house is appraised well below the asking price, which in most cases, causes a deal to fall through seller’s hands, and often forced to reduce the home’s selling price.

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