Should a home seller get a pre-listing appraisal? Only if its usefulness is kept in context, otherwise, it’s likely to be a waste of money. As both an active certified appraiser and associate broker I always try to find why the question was asked before answering it. Many times, having an appraiser as a “consultant” is far better than having them complete just an appraisal.
Typically, sellers say the main reasons for ordering pre-listing appraisals include:
1. To get an accurate list price. Perhaps:
- In real estate, the 80/20 rule is more like 90/10; 10% of the agents do 90% of the work. If 90% of the agents are that ineffective, then a seller seeking credible, impartial advice is understandable. And VERY disappointing that they can’t get it from some agents.
- Potential problem here is that appraisers look at closed sales – they can be slow to consider pockets of rising value.
- Good coordination with an experienced listing agent can work well in this case. It can also work to counter some agent simply telling an owner what they want to hear to get a listing.
2. A pre-listing appraisal will convince buyers that the home is “worth it”. Not really, consider:
- How does the buyer know this is an objective appraisal?
- What is the stated purpose of the appraisal?
- What parameters did the appraiser use when developing the opinion of value?
- How old is the appraisal, have conditions changed since completion?
- Is the appraiser experienced in this market area?
3. A pre-listing appraisal will counter a “low” appraisal. Rarely if ever:
- An appraisal for a mortgage is different than a “regular” appraisal
- Appraisers are required to follow rigid underwriting guidelines, most non-mortgage reports are not completed to underwriting standard
- Every appraiser has their own methods, measuring style, data sources, etc; they will do their own work and develop their own opinion
- Loan types vary as to the corresponding requirements of each report – FHA, VA, USDA, Conventional, Jumbo….
- Lenders will not consider anything from other than the appraiser hired to complete the assignment or an additional appraisal from another approved appraiser on their list. Of course they say “disputes” will be considered, but practically that is to appease regulators only
So what benefit might a pre-listing appraisal provide? I might see two occasions.
A pre-listing appraisal can provide information and an impartial opinion of value to a seller.
- Many agents want listings, a few have been known to tell a seller anything to get a listing. Valuable marketing time is then lost as the overpriced home languishes
- Owners may not like an appraiser’s conclusions but they are may be more likely to accept it from an appraiser than hear it from a listing agent. Appraisers are more connected to the mortgage process.
- Many agents have no idea how to view a home like an appraiser or what parameters an appraiser works under. An appraisal can provide the seller a better, focused look at the current market from the perspective of a buyer and lender.
- Parts of the appraisal like the sketch, plat, etc can be used as exhibits for the listing. An appraiser knows how to measure a home and what constitutes living area, most agents do not. Big surprises surrounding square footage can be avoided.
Having the appraiser as an advocate can be beneficial.
- The appraiser can be a useful sounding board during the listing if needed by the agent or owner. Market updates, pricing adjustments and even help after contract are potential benefits.
- If a pre-listing appraisal is completed, why not have the appraiser involved when the buyer’s appraiser comes through. The appraiser can prepare a package of comps that meet the appropriate underwriting criteria, demonstrate by their presence that this transaction has been professionally handled and address any potential issues “appraiser to appraiser”. This isn’t cutting out an agent; this is ensuring that the appraiser understands the virtues of the home from another appraiser; in a sense, speaking the same language.
Consider hiring an appraiser as a consultant while the home is listed. Use them to check and verify the data that the list agent collects and ensure that job is accurately completed. Hiring an appraiser to complete a pre-listing appraisal can be beneficial if the appraiser’s use is kept in context. Unrealistic sellers, “yes” agents just looking for listings and sellers that harbor an intrinsic distrust for the real estate profession are unlikely to find a benefit. However, an appraiser employed as a consultant during the selling process can provide a significant advantage; it all comes down to how they are utilized.