So the time has come for you to sell your property!! Let’s briefly consider the typical order of events that culture has accepted as standard practice.
Step A.
The property owner calls one or more real estate sales professionals to interview, visit the property, and discuss a marketing plan.
Step B.
Upon visiting the property and glancing at recent market activity, the sales professional will then either use a combination of gut instinct + CMA to suggest a listing price, or he or she will simply go with whatever the property owner desires.
Step C.
Once the home has been formally marketed and is under contract with a prospective buyer, that prospective buyer (or that buyer’s lender) will hire an appraisal to analyze the property’s current market value.
Two Big Problems With The “Standard / Typical” Practice:
First, the seller does not receive a copy of the appraisal report or have a legal right to access it! This is because an appraisal report is a confidential flow of information from an appraiser directly to the appraiser’s client and intended users only. Second, and perhaps most intriguing, is the fact that the seller’s real estate sales professional, while he or she may be a gifted communicator and marketer, is actually not licensed to provide an opinion of value for a property!
What If Your Home’s Listing Price Is Set Too High?
If your property is overpriced, then it may not appear in your potential buyers’ search results, which negatively affects the number of showings for the home. When a property sits without showings, sellers and their agents tend to get anxious, which then can lead to impulsive and rash decisions.
Once I appraised the home of a young professional who was engaged to marry in the coming months. The property had initially been listed for sale at an asking price of $425,000. After 21 days and limited interest from potential buyers, the price was lowered to $409,000. Fourteen days later the price was lowered again, this time to $399,000. They were getting warmer, but they still had no clue what the home was worth! Finally, one month later, a savvy buyer made an aggressive offer of $375,000, and, likely due to emotional exhaustion, the sellers simply accepted the offer without countering and were officially “under contract.”
As the buyer’s lender was processing documentation and closing was fast approaching, the buyer’s lender hired me to appraise the property on their behalf. The appraisal indicated a current property value of (drum roll....) $385,000! Unfortunately, the seller
was selling for $10,000 less than the property’s current market value. It was money that could have assisted with a wedding, a honeymoon, or simply starting a new chapter of life with her fiancé.
What If The Listing Price Is Set Too Low?
Unless a bidding war causes buyers to run up the sale price, then you are leaving money on the table- plain and simple. I once appraised a residential condominium unit that had been listed for sale at an asking price $179,900. It is unclear as to how they determined their listing price, but the property quickly went under contract at $180,000. I was hired by the buyer’s lender (once again, late in the process) to appraise the property as the closing date loomed. The appraisal indicated a current market value for the property of $193,000! The seller ended up selling for $13,000 below market value and paid $5,000 toward the buyer’s closing costs, leaving a grand total of $18,000 on the table.
Know Before You Show!
Hiring an appraisal prior to listing the property for sale (and preferably prior to even speaking with a real estate agent) can help you prevent over- or under-pricing a property. Avoid the emotional roller-coaster and clearly discern which offers to accept, counter, or reject! Ultimately, you can maximize the profit from the sale of your home by knowing your home’s current market value before entering into conversations with real estate sales professionals.
