Should You Have Your Home Appraised Before You List it for Sale?
If you’re thinking about selling your home, you want to know exactly how much it’s worth. That way, you can sell it quickly and at the right price. Most people rely on a real estate agent to tell them how much their home is worth. That’s because real estate agents are very familiar with the local market, and they know what buyers are willing to pay for homes right now. However, some sellers choose to get a home appraisal before even listing their home. Although that’s not always a terrible idea, it’s usually best to avoid the appraisal and rely on a REALTOR® for accurate pricing information. This guide explains.
Should You Have Your Home Appraised Before You List it for Sale?
Real estate appraisals are an important step in the selling process. However, usually it’s a bad idea to have your home appraised before you listed on the market. To understand why, you first need to understand what a home appraisal is and what purpose it serves.
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What is an Appraisal?
A home appraisal is a professional opinion on how much your home is worth. You pay an expert to compare your home to other, similar homes in the same area and then come up with a price. However, you usually want to wait until after a buyer has offered to purchase your home before hiring an appraiser. The appraisal’s main purpose is to tell a lender how much your home is worth so that the lender knows whether it is making a good investment by allowing a borrower to use their money to purchase a home.
For example, if your home appraises at $400,000, but homes like yours are easily selling for $450,000 in the same area, relying on an appraisal to set your home’s price would be a tremendous mistake. You’d lose out on $50,000.
The appraisal doesn’t necessarily tell you what you can sell your home for. In fact, you need to rely on a real estate agent for that. Remember, your home is only worth what a buyer is willing to pay for it. That means regardless of the appraisal value, your home may sell for less or more than what you expect.
Your real estate agent will compare your home to other, similar homes in the same area to help determine what buyers are willing to pay right now. For example, if you have a four-bedroom home with two and a half bathrooms and a swimming pool, your agent will compare your home to other homes that all have the same number of bedrooms and bathrooms, as well as other amenities. Your agent will look at homes that have recently sold, homes that were on the market and never sold, and homes that are currently for sale right now. This helps your agent understand the amount that buyers are willing to pay for homes like yours.
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What Happens if Your Home Appraises Low?
If a buyer makes an offer on your home and you later pay for an appraisal, which shows the lender whether they are making a good investment, the appraisal may come back lower then your asking price. If that happens, the buyer may take one of two routes: they may ask you to lower the asking price of the home so they can still borrow the full amount from their lender, or they may choose to walk away from the deal and purchase a different home.
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