Thursday , 1 October 2020

Should I Show Buyers My Prelisting Appraisal?

This article was originally published HERE for more articles from Tom Horn you can visit http://birminghamappraisalblog.com

Do buyers need to see my prelisting appraisal?

I was doing a prelisting appraisal for a client this week and she asked me an interesting question I want to share with you. She wanted to know if she should show the report to buyers looking at her house or if she should keep it private. Let’s take a look at the benefits of both of these options.

Why should I keep my prelisting appraisal private?

If you want to keep your prelisting appraisal private, potential buyers will not have the benefit of knowing what it appraised for and you can use that to your advantage in negotiating a price. It is my belief from what I have seen in the past that most buyers want to think that they got a good deal and in order to do this they will try to negotiate a price down from what you originally asked for your home. If they know the appraised value from the report this may sabotage this approach.

It is this type of buyer that will try to get you to lower your price no matter what it is. To be prepared for this it might  be a good idea to set the asking price for slightly more than the appraised value to allow room for negotiations.

Homes typically sell for less than the asking price and this difference is what is referred to as the sale price to list price ratio. This ratio is expressed as a percentage and an appraiser can tell you what it is for your area so that you can determine how much more than the appraisal the list price should be.

The major benefit of this approach is that it allows you more freedom in negotiation.

Reasons to Share Your Prelisting Apprasial

Sharing your appraisal may work for you if you are a no nonsense person and feel that you should list your home for what it is worth and not worry about negotiations. With a recent prelisting appraisal you will have tangible evidence to potential buyers to back up your asking price. You can show them that what you’ve listed it at is what it appraised for and if they don’t like it they can take a hike.

Making the appraisal available to buyers can also provide peace of mind to them that there is less likelihood of the deal falling through due to a low appraisal. There is always the possibility of additional sales occurring between the prelisting appraisal and the bank appraisal but with a stable market any changes in market value should be negligible.

Other benefits to this approach include sharing other parts of the appraisal such as the floor plan sketch and the sales that were used to arrive at the value. This approach will also allow you to be more transparent to potential buyers, which may help and, as I mentioned previously, this can give them some peace of mind.

Conclusion

The strategy that you use will depend on who the potential buyer for your house is. If you go into the home sale process prepared with a prelisting appraisal you can decide what you want to do after you learn a little more about the who you’re working with. I hope this discussion about two possible approaches to use when selling your home has been helpful and gives you some food for thought.

Have any comments or would you like to submit content of your own? Email comments@appraisalbuzz.com

 

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About Tom Horn

Tom Horn
Tom Horn provides residential appraisal services in the central Alabama area. He has over 24 years experience in the business and holds the SRA designation from the Appraisal Institute. In addition to performing appraisals for first mortgage loans and refinancing he prepares reports for other uses such as estate planning, private mortgage insurance removal (pmi), For Sale By Owner marketing, and insurance valuations. Tom is the author of BirminghamAppraisalBlog.com, where he helps agents, mortgage lenders, attorneys and home owners learn why and how appraisers do what they do by explaining the appraisal process. He has contributed content to nationally know appraisal provider McKissock and speaks regularly at local real estate offices to help bridge the gap between appraisers and agents.

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One comment

  1. Avatar

    I started appraising in ’89, did the SRA dance and then left the lender side after all of the emasculation of our business. I switched gears, joined the enemy and secured my broker license; more money, fewer headaches and less wear and tear. Still deal with 90% of numb skull agents but that’s another story.

    Prelisting appraisals are like preinspections; about useless. The buyers will determine price and unless the appraiser writes it to current UW standards it’s pointless. Most won’t as those assignments allow for a bit of latitude. I also wouldn’t give squat to the other side unless it benefited me. Why plant a seed?

    Hold it if needed to challenge the buyer’s appraisal, make both agents work; you’d be surprised how inept the vast majority of agents are.

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