Appraisers are not amused.
Real estate agents continue to blame them for deals that fall apart. Why’s that? Because the buyer and seller strike a deal, but then the selling price has to be supported by an appraisal from a licensed appraiser. And a licensed appraiser looks at all the sales for that neighborhood. Often included in the appraisal are properties sold as short sales or foreclosures – always at a lower price than non-distressed sales. So the average price goes down, and suddenly the house under contract looks overpriced. The lender won’t make a loan for the sale price, so the buyer’s offer is no good.
Agents like to blame appraisers, but it’s really up to the agents to set a reasonable asking price to begin with, based on a comprehensive survey of recently sold properties that are similar to the house about to be sold. But agents traditionally rely on a free ‘comparative market analysis” to win a listing. The CMA is usually based only on what the agent can quickly and easily pull from the local multiple listing service. And the local MLS doesn’t include many short sales and foreclosures because these days, banks are selling groups of such properties directly to investors. Ergo: the comparative market analysis isn’t a good pricing tool. But agents keep CMA’s, keep setting up their clients for disappointment by asking too much based on faulty research – and then blame appraisers.
If you are thinking about selling in this contradictory market, you must replicate the appraiser’s process and set your price accordingly. You have several options:
- Commission a formal appraisal. It’s about $400. But it could be the smartest $400 you’ll ever spend, because the price that comes back is the price that will likely be accepted by your buyer’s lender. And it’s hard to argue with a current appraisal in negotiations. An appraisal lets you set your price and stick with it.
- Do your own research on your local home market. We show you how at ForSaleByOwner.com.
- You can figure out which houses have recently sold as foreclosures or short sales by looking at who bought or sold the house in public records of recent sales. If a seller is a bank, chances are that the property was bank-owned, via foreclosure or short sale.
Image courtesy of Morguefile contributor dubois.