Pricing a listing is one of the hardest and perhaps most important tasks in residential real estate. So why do serious seller's fail to get one?
A professional appraisal may cost between $300.00 and $450.00. So why do serious seller's fail to get one? An appraisor can come in with an independent, unbiased opinion and put a value on your home and property. Again I ask..... so why do serious seller's fail to get one?
Perhaps one of the answers is that sellers aren't honestly interested in what the home is worth. It may be that sellers are more concerned about how much they have into their home and not what the market will bear. So they add the purchase price together with the new carpet they had installed, add the cost of the new deck....and the list grows. They tally up the list and this becomes the magic number that goes on the listing agreement. Some sellers use sites like Trulia and Zillow to get what they consider to be a fair market price. Still others use the neighborhood "grape vine" to find out how much the home across the street sold for. Unfortunately none of methods previously described are methods that appraisers or realtors use to put a value on their home.
Appraisers use two primary methods to determine the property's worth. The sales comparison approach or the cost appropach. In the comparison approach the appraiser compares three or four similar homes that have sold in the area, these are called comparables or comps. They consider specific components such as lot size, square footage of both finished and unfinished spaces, style and age of home, as well as other features such as garages and fireplaces. The cost approach is used for often for new property and is based on reproduction costs. The appraiser estimates the cost to replace the structure on the property.
The appraisal report may include how the appraiser determined the value (which method he used). The condition of the home and permanent fixtures along with improvesments and material used for those improvements. Structural problems or wet basements may also be noted. Notes about the area, recent market trends that may affect the value and a comparative market analysis that supports the appraisal.
Realtors will be happy to do a comparative market analysis on your home as well. They too look at market trends and give you a value based on the comparison approach. A realtors experience and desire to price it fairly can the sticking point. Unfortunately, the selling price can also be a tool used to get a new listing. This is common knowledge to someone who works in the industry but to a new seller they can be taken down a long road of price reductions, disappointment, and possible bank appraisal problems that cann result in an even lower sales price. How important is it to have an unbiased opinion you ask, I personaly recommend it!