The economic challenges For Sale By Owners [FSBOs] are facing in today’s economy can be heartbreaking. And wherever home prices are down, buyers are looking to get already deflated property even cheaper. What’s an FSBO Seller to do? How can today’s Seller be assured that they are getting the best price possible for their home?
This article explains how to increase your overall equity before the appraiser arrives, how to find a professional with an unbiased opinion, why a second opinion matters, and how a For Sale by Owner can save extra money along the way. Home appraisals are an intricate piece of the puzzle when it comes to selling real estate; knowing what to look for can be a huge asset to today’s home sellers. Now, more than ever, appraisals are one of the biggest factors in the decision process of a sale completing or not.
A real estate appraisal refers to the process of trying to determine the real value of a property at a given time. For example, an appraisal completed five years ago will have absolutely no merit at this time; it must be current. Appraisals are determined by current prices and comparable homes in the neighborhood. The value of a property is determined by the condition, year, size, and how this property directly compares to similar properties in the area that have recently sold, or are presently on the market.
When conducting any real estate transaction, an appraiser’s services are necessary to determine the true value of the property. For Sale By Owner sellers want every penny they can get. After all, they haven’t chosen the path of least resistance ‘just for fun’… it’s all about saving the commission! Buyers want the best deal possible, whereas lenders want to be assured the value exists before lending funds are released. In the end, there is no professional that can meet the needs of all parties better than a Certified Appraiser.
Finding A Good Appraiser
There are all types of appraisers out there. For our purposes, let’s say they’re either Ethical, Unethical or simply Neurotic. Appraisers are real people, and just like every other profession in life, not all are good at what they do…
The Ethical Appraiser
The best type of appraiser is the kind of person who is going to be totally honest with you and holds a professional position in the industry. The ethical professional will not benefit from the transaction in any form, therefore is able to give an unbiased opinion of the facts collected. A good place to start in your search for quality appraisers is the Appraisal Institute of Canada. (You can also visit the CanadianHomeFind Professional Directory for quality local professionals.)
Certified appraisers with excellent reputations are easy to find once you start looking. Do your homework and verify the proposed appraiser online and through referrals. You are counting on, and paying this person, to do the best job possible for you. Most appraisers with a professional track record will not hesitate to offer reviews/referrals for you to verify their recent services. As well, financial institutions such as banks and credit unions have longstanding histories with particular appraisers. If asked, they will be more than happy to share this information with you.
The Unethical Appraiser
Some appraisers will ‘rubber stamp’ anything, just to make a deal go through. There are people in financial positions that can make things happen, legal or otherwise. You may be tempted to use this type of person, for example, especially if you desperately rely on your appraisal report to refinance a mortgage. However, stating a higher price of value can qualify as mortgage fraud. Mortgage fraud is a common illegal activity that is currently on the rise across Canada, and it comes in many forms. By using a (known) unethical appraiser, you and all involved could be legally charged with a felony, so make sure you do your homework.
The Neurotic Appraiser
There are appraisers who go beyond ‘picky’ to the point of neurotic. These types will red flag even the most miniscule deficiencies, which does not bode well for your home sale! All these little red flags deplete the value of the home, causing unnecessary value loss where perhaps no deductions were required, or were indeed exaggerated. This may be an act of perfection in the appraiser’s view, but to a For Sale By Owner or any home seller, it can be a nightmare.
Apart from financial institutions, a good place to look for reputable appraisers is by referral among area lawyers and real estate brokers. Established local professionals will have a lot of history and experience dealing with appraisers on a daily basis. They can verify who is competent and who to steer clear of… And because they are offering a professional opinion of a neighboring profession, they will be sure to guide you well- a bad referral would reflect directly back on their own reputation.
Cost Associated with Appraisals
So how much does a home appraisal cost and why? To answer this question, let’s have a look at the different types of home appraisals.
The Professional Home Appraisal
A Certified Appraisal is the most common method of settling the value of a home for any reason. Most lenders will urge you to use this method as they may not be willing to accept any other form of valuation than that of a certified professional. This person is licensed to give a professional view of the value-estimated condition of the home and area in which you live.
The cost of carrying out this appraisal varies depending on where one lives and the layout of the home, but the most common range of cost is from $350 to $600. Under this method, an independent and experienced appraiser is hired to come to your house, carry out a thorough investigation, and eventually come up with a comprehensive report. This procedure may take several hours or even days, and at times, the professional appraiser may produce a report containing pictures as visual evidence for the materiality of his report. While at your residence, the home appraiser should do several things:
- Measure the size of your home
- Take pictures of the house
- Note the age and damage to the home
- Note added or special upgrades
- Compare your home with three similar homes (within a few miles of yours)
- After completing the visit, he or she will create a written report that will give you a fairly accurate estimate of value based on the facts observed during the appraisal
The Real Estate Agent’s Market Evaluation
A Market Evaluation done by a real estate agent is not the same thing as a Certified Appraisal. Instead, it involves hiring the services of a real estate agent to carry out a comparable evaluation of your home.
The market evaluation is a convenient choice, especially due to the fact that most agents are very experienced in this field. Real estate agents are usually knowledgeable regarding their local city and neighborhood, thus they will tend to offer current, reliable and factual information on how your home compares to others on the market. The cost of the market evaluation may depend on your relationship with the real estate agent. As a For Sale by Owner, for example, there may be a fee for such a service, since the agent cannot expect a commission. Otherwise, they tend to offer these services free of charge (a no-cost estimate). Real estate agents love to get more business and they are more than happy to help you. I suggest getting no less than three opinions from those who are experienced with selling homes in your neighborhood.
Finally, this method of appraisal is fairly accurate, but can’t be used for loan purposes or financing a home. Alternatively, it isgreat for helping sellers determine an asking price when they are ready to market their homes, or if you are just curious about the value of your house in today’s economy.
Online services are the latest trend due to the widespread use of the internet in the real estate industry. With the onset of new technology, it is now possible to conduct an online home appraisal from the comfort of your home or work! The online companies value your house on the basis of historical data. Accuracy may vary depending on the actual data that the site has stored and the date it was entered. This home appraisal method is offered as a tool to use free of charge on most websites, but in some cases, it can cost a user fee of approximately $99, give or take a few bucks. It is always advisable to use free sites, due to the fact that not all information is accurate and may not be worth paying for. Typically, this service shouldn’t cost anything and only takes a few seconds to get a decent valuation. All you need to do is enter your address and basic information about the home. The service will compare your home to recent home sales in your area and will calculate an estimate. Since it is free, you can use it often, and even as a comparison tool with respect to an agent’s market evaluation, for example. It goes without saying that free services are great for determining your asking price, but are unlikely to be taken into official consideration by banks and financial institutions.
Get the Best Price Possible
There are a few things homeowners and For Sale By Owners [FSBOs] can do to ensure they are getting the best price possible when it comes to home appraisals. The condition of the home is a huge factor in value, so dress for success, and get your home in tip-top shape before the appraiser arrives.
Back to first impressions: make an effort to present your home in the best light possible. A home that is clean and well-maintained will be appraised for a higher price than one that is not. Start on the outside and work your way in… There are even more articles on how to do this properly in the CanadianHomeFind Blog.
Pay attention to ‘curb appeal’. While a few dirty dishes left out may not be appealing, it probably won’t impact your home’s value, but that half-assembled car, overgrown hedge or uncut lawn will have a negative impact. Have a look at your home from a buyer’s perspective. Would you be excited to view this property? Is it clean, in good repair and welcoming? if not, then these are the things you need to improve upon right away.
Take some time to spruce up the outside of your home. Not only is it the appraiser’s first impression, but he or she will make notes of the condition of the home from an exterior prospective. Sagging eavestroughs, for example, will do little to improve the value of your home. Once the exterior is taken care of, do the same on the inside. De-clutter, repair, and paint where needed. A clean home implies a well-maintained home so dust everywhere… even the furnace room! Now is the time to consider painting, new carpets, and new lights or plumbing fixtures that won’t break the bank, but can provide a dramatic impact. This list may also include leaky faucets, cracked windows or missing handrails.
In sum, the cleaner the home, the better the presentation and the higher the appraisal may be. When the appraiser comes to your home, don’t have your dog out barking, or pets lunging at the stranger. This is not only poor hosting style- it can really annoy the appraiser. You don’t want the process you’re paying for rushed due to annoyance; you want him to spend quality time evaluating all aspects of value, inside and out.
It is also a good idea to be prepared with a list of home upgrades and receipts, to inform the appraiser’s home visit. State the work that was done, the cost incurred, by what company and when. That way, the appraiser has a reference as to what has been updated and how recent or professionally the work was completed. Include a list of amenities and features you personally love about your home and its location. If you have the opportunity, have a real estate agent provide you with a Comparative Market Analysis (CMA) prior to the appraisal. This information may help the appraiser with current comparables, as well as function as a second opinion on your asking price.
Getting a second opinion from other resources is always a good idea. The Seller or FSBO may be unhappy with the value proposed by a single opinion, and having more than one opinion can either verify the first opinion or prove it wrong. The value of a home is based on opinion, but make sure the opinion is backed with facts provided by valid professionals involved in the real estate industry.
In conclusion, the appraising of a home serves as a crucial step in the home buying or selling process. Banks use certified appraisal experts to determine how much value a property has, thus determining how much the bank would be willing to lend a buyer. Banks don’t want to be stuck with properties that are valued at less than what is invested, so the appraisal not only protects the buyer, but the bank as well. Each lending institution will provide a list of properly certified and licensed appraisers with whom they regularly do business.
In the past, lenders would accept appraisal reports from as far back as six months. Unfortunately, times have changed, and lenders are almost certain to request new appraisals, even if previous ones were completed mere months ago. Within that short period, it’s true that the value of your home could have changed dramatically. Even if the seller has an appraisal completed within their allotted time frame, a lender still may not accept it. In fact, a lot of lenders insist on having their own appraisals done. In certain instances, you can get away without having a new appraisal if the last appraisal was done by a lender-approved appraiser. Most lenders will have a number of real estate appraisers on file that they consistently use to assess the value of properties for lending purposes.
The Seller or For Sale By Owner [FSBO] should be made to feel completely comfortable in approaching the Appraiser with questions at any time. There is no such thing as a stupid question, so ask as many as you feel you need to… That’s why the Appraiser is there, and why you are paying for this service.