If you have ever been through the home sale process, you’ve maybe heard of a pre-listing appraisal.
But what is it exactly?
A pre-listing appraisal estimates your home’s current market value before you list it for sale.
This appraisal can help you determine an accurate listing price for your home, saving you time and money in the long run. They can be beneficial for a few reasons covered in this article.
- A pre-listing appraisal is a professional valuation of your home’s market value. A licensed real estate appraiser completes the appraisal before you list your home for sale.
- A pre-listing appraisal can help you determine an accurate asking price for your home.
- Although a pre-listing appraisal can tell you your home’s value, it may not indicate what people are willing to pay.
Understanding Pre-Listing Appraisals
If you plan to sell your home, you may have heard about a pre-listing appraisal. This is a paid valuation conducted by a licensed appraiser, which will determine the current market value of your home.
A pre-listing appraisal differs from a comparative market analysis (CMA), usually prepared by a real estate agent.
A pre-listing appraisal provides a much more accurate estimate of its worth.
It is important to note that an appraisal is just one factor when pricing your home. Ultimately, the market will determine the final price that buyers are willing to pay.
Determining Market Value
Determining the market value is crucial to setting a fair list price for your home.
The market value is the price a willing buyer would pay, and a willing seller would accept in a typical transaction. It is influenced by location, size, condition, and other characteristics.
One way to determine market value is through a pre-listing appraisal.
For a pre-listing appraisal, an appraiser inspects and analyzes your home to produce a report with its market value.
The appraiser considers similar homes recently sold in your area, also known as “comps” or comparable sales.
Comps are homes that are similar to yours in terms of various characteristics. These can be lot size, square footage, condition, room count, and other traits.
The appraiser then compares these homes to yours and makes value adjustments based on superior and inferior traits.
Comparative Market Analysis
You may receive a Comparative Market Analysis (CMA) if you work with a realtor.
A CMA is a report produced by a realtor that is auto-generated by recent sales data in the market area.
It contains data such as a list of comparables, averages, and other relevant statistics.
While a CMA does not give a specific value, per se, it can help give you an idea of your property’s market value.
Another way to determine an estimate of market value is through online home value estimators, such as Zillow’s Zestimate.
These estimators use algorithms to analyze data such as recent sales and tax assessments to estimate your home’s value.
While convenient, online estimators may not be as accurate as an appraisal, as they cannot consider your home’s unique features.
Pre-Listing Appraisal vs CMA
When selling your home, a real estate agent can play a crucial role in helping you navigate the process. One of the tools that agents use to determine a listing price is a comparative market analysis (CMA).
A CMA is a basic analysis of recently sold homes in your area similar to yours. This report provides data on the current market conditions and helps agents determine a fair price for your home.
Real estate agents typically prepare a CMA report for their clients before listing a property for sale. The report contains average sale prices, price per square foot, days on the market, and other related statistics.
A CMA is simple to produce.
All it takes is the click of a few buttons, and voila.
A pre-listing is an appraisal report completed by a licensed appraiser.
It typically involves a detailed property inspection with measurements, photos, etc.
The report is thorough, detailed, and unbiased.
Anybody can click a button and produce a CMA, but only a licensed real estate appraiser can produce a pre-listing appraisal.
An appraisal requires deep research of market trends, comparables, and the property itself. It provides an analysis that a CMA could never give you.
A pre-listing appraisal will give you the real value of your property based on real data. The personal interests of the parties involved never influence it.
Factors Influencing the Appraised Value
When appraising a property, several factors can influence the value. These factors can vary depending on the type of property, its location, and its condition. Here are some of the most common factors that can influence the appraisal of your property:
- Age of the property: The property’s age can impact its value. Older properties may have outdated features that can decrease their value. The opposite may be true for newer properties.
- Condition: The overall condition is a huge factor when it comes to value. A well-maintained property is likely to be valued higher than a property in poor condition.
- Quality: Like condition, quality is a huge factor when it comes to value. Quality refers to the materials used in the construction of the house. This can range from roofing to kitchen cabinets.
- Size (Square Footage): The size or square footage of the property is another essential factor in the appraisal process. The more square footage a property has, the higher its value is likely to be.
- Location: The property’s location is one of the most important factors in determining its value. In some areas, values can change significantly from neighborhood to neighborhood.
- Bedrooms and Bathrooms: The number of rooms a property has can also affect its value. Homes with more bedrooms and bathrooms are typically valued higher than ones with fewer.
- Lot size: Properties with larger lots are typically valued higher than smaller ones.
When to Get a Pre-Listing Appraisal
Whenever you plan to sell your home, consider a pre-listing appraisal. Here are some scenarios where they can be especially useful.
For Sale by Owner (FSBO)
If you plan to sell your property as a For Sale By Owner (FSBO), you should absolutely get a pre-listing appraisal.
While it is not mandatory, getting a pre-listing appraisal can be beneficial for several reasons.
Firstly, it can help you set a fair price for your property. Without an appraisal, you may end up setting a price that is too high or too low, which can deter potential buyers.
You should never rely on online estimators regarding a transaction of this magnitude.
Secondly, a pre-listing appraisal can help you identify any issues with your property that may affect its value. An appraisal will indirectly help you identify improvements that could be made before listing your property for sale.
Thirdly, a pre-listing appraisal can help you negotiate with potential buyers. If you receive lowball offers, you can use the appraisal report to justify your asking price.
A pre-listing appraisal may benefit you if you live in a home that is hard to value based on recent comparable data.
A complex property may come in the form of:
- Bigger than surrounding properties
- Significantly more upgraded
- Unique features (Pool, boat dock, outbuildings, etc.)
- Unique appeal (A-Frame, Dome House, Houseboat, etc.)
In any of these cases, there may not be directly similar comparables, and a CMA or realtor cannot produce an accurate list price.
In this case, an appraiser will use their expertise in valuing real estate to estimate an accurate value.
The report will provide you with peace of mind and buyers with proof of the value.
Disagreement With Realtor
If you and your realtor disagree on the value of your home, a pre-listing appraisal can help to argue your case for listing the home higher or lower.
While realtors are the best at selling homes, they are not always the best at valuing them.
An appraiser spends their entire career valuing homes and will be able to produce a more reliable estimate of market value.
Benefits and Drawbacks
Getting a pre-listing appraisal has its benefits and drawbacks. Here are some of them:
Peace of Mind: A pre-listing appraisal gives you peace of mind by accurately estimating your home’s value. You can use this information to set a fair price for your home, which can help you avoid overpricing or underpricing it.
Second Opinion: A pre-listing appraisal can also give you a second opinion on the value of your home. If you have already received a value estimate from a real estate agent, a pre-listing appraisal can help you confirm whether the estimate is accurate.
Independent Appraisal: A pre-listing appraisal is an independent appraisal conducted by a licensed appraiser. This means that the appraisal is unbiased and objective, which can help you avoid potential conflicts of interest.
Fluctuations in Interest Rates: One of the drawbacks of getting a pre-listing appraisal is that the value of your home can fluctuate depending on changes in interest rates. This means the appraisal may be inaccurate if interest rates change significantly before you sell your home.
Emotions: Another drawback of getting a pre-listing appraisal is that it can be emotional. If the appraisal returns lower than expected, it can be disappointing and frustrating.
Cost: A pre-listing appraisal is an out-of-pocket expense. Fees are often $400+ for an appraisal. However, the cost can be worth it if it helps you set a fair price for your home and sell it quickly.
A pre-listing appraisal can be a great tool when selling your property.
It will provide you with an accurate estimate of the current value of your property, which can help you in several ways.
It’s important to note that a pre-listing appraisal is not always necessary, and the decision to get one is ultimately up to you.
Frequently Asked Questions
The purpose of a pre-listing appraisal is to help you determine an accurate list price for your home.
A pre-listing appraisal can help you, as the seller, accurately price your home for a smooth sale.
The best time to get a pre-listing appraisal is before you list your home for sale. This will give you time to review the results and make any changes before putting your home on the market.
The cost of a pre-listing appraisal can vary depending on several factors. These include the size and location of your home, the appraiser’s experience, and the complexity of the appraisal. A pre-listing appraisal can cost anywhere from $400 to $800.