While it is requirement that a buyer get a home appraisal whenever a bank or lender is involved, there are many situations in which a homeowner can make this decision themselves. A common scenario would be a For Sale by Owner, or FSBO as we call them. Even if you have done your research and feel that you know what you can get for your property, you may want to ask yourself a few questions to determine if you should get an appraisal before selling FSBO.
First Question – Do You Have a Recent Appraisal?
This seems like a no-brainer but people often overlook the fact that they may have access to a fairly recent appraisal due to a refinance or recent purchase. While markets can certainly change drastically from season to season, a recent value from an actual appraiser may help point you in the right direction. Furthermore, if the appraiser includes Market Trends within the report (like all of our reports have) then you may be able to do a little forecasting of value changes.
Next Question – Is Your Neighborhood “Cookie Cutter” Tract Homes?
Real estate pros like to use the term Cookie Cutter for neighborhoods in which many of the homes are similar in age, style and appeal. This is very common in tract neighborhoods that may have 1-3 builders present; the builders may offer slightly different upgrades but for the most part size of the homes will be the biggest difference. In this scenario price per square foot may actually be useful for determining value.
Question Three – Could An Appraisal Save You Money?
Imagine a scenario where you are paying cash for a home so you are not required to get an appraisal. But for your own piece of mind you decide to hire a professional appraiser to provide a valuation. Now imagine if that appraisal came in $15,000 lower than what you were about to pay. Now imagine this entire situation in reverse – You are selling a home, and you’ve listed too low. Our appraisal fee for a typical residential property is $325-$350. Would you pay this to save $15,000?
Final Question – Would an Appraisal Speed Up Your Sale?
A cost often unaccounted for in the sale of real estate is the cost of holding onto a house for a period longer than anticipated. Obviously this is something that you would run into if you priced your home too high for the current market. Image being ready to move in 2 months, but your home takes 5 months to sale. That is three months of mortgage payments you had to make on an empty home (plus your new living expenses). If your mortgage payment is $1,600 then this additional cost would be $4,800, which would be almost 15x the cost of an appraisal.
These are just a few considerations to weigh, there may be more for your particular situation. In the end you need to take a realistic look at the risk-to-reward ratio and determine if you are confident pricing your home on your own. In most cases the sensible choice is to seek the opinion of a professional appraiser. The small amount of money spent could potentially save you thousands, time and aggravation.