Do I Need an Appraisal to Sell My Home?

by Mark Fisher, Appraisal Technician

July 2020

You’re putting your home on the market for sale. You have no idea where to start or what it’s worth. There are so many factors involved in ensuring you get a fair price and hopefully make a profit. Do you need to get a home appraisal to start the process?

You might think the answer to this question would be an easy one, but you would be surprised at the debate that exists on this topic. Different people have different opinions. Here is an extensive, unbiased overview, giving the pros and cons of the issue, hopefully helping you determine if it is the right option for you.

We will start with reasons that some people believe an appraisal is not necessary or why it may even be a bad idea. Then, we will cover why an appraisal might be advantageous when selling your home.

Reasons not to have your home appraised before selling

Realtors often do not want you to get an appraisal done if they are trying to sell the property for you. Here are some of the reasons they give for not having an appraisal done before listing and putting your home on the market.

An appraisal is just an opinion

You could hire several appraisers to appraise a property and get several different opinions of value. Appraisers are human, and even the most experienced ones are still subject to a “gut feeling” that might influence the outcome of the appraisal. While lenders use appraisers to determine the value of a home, to have a reference for their loan limits, many realtors believe it is not the appraiser that determines what the house should sell for, but the buyer.

The realtor might know something the appraiser doesn’t

Many realtors believe they can determine the value of a property just as well as an appraiser, maybe even better in some cases. Realtors may have a better appreciation of the property’s selling points, which the appraiser may not have taken into consideration. Also, an experienced realtor, who has been working in a certain area for a long time, may know the specific market better and may have some inside knowledge of the territory and the trends within it.

Appraisers and realtors both use comparable properties in the area to help determine the value of the selling property, but realtors may have a more detailed knowledge of area homes, neighborhoods, and regions. The appraiser will probably use comparable homes in the neighborhood as a reference for the value of the home being appraised, but the appraiser will not personally inspect those other homes. Therefore, an appraiser could unknowingly use a home that needs repair or has some damage, which might make it less comparable to the home being appraised. The appraiser might be helped somewhat by using interior photos posted by a realtor, but that will not always be possible, since realtors often remove photos after a home sells. Meanwhile, realtors may have better knowledge of these surrounding properties or be able to find out, since they may have more resources in the area.

Potential buyers don’t really care if you have an appraisal

Someone interested in your home will probably not be interested in your appraisal. They may believe it could be biased toward you as the seller, even if that is not true. The buyers don’t know the appraiser you hired and might think you have a personal relationship with him, or that he might have an interest in making the appraisal sway in your favor. If they are borrowing to purchase the property, their lender will also undoubtably require an appraisal before loaning any money for the purchase, so the buyers would rather wait for that appraisal. Finally, buyers would rather negotiate with their realtor than trust the appraisal from the seller.

The buyer’s lender will not be interested in your appraisal

The buyer’s lender will almost always request an appraisal of their own. This is done to protect themselves or to make the mortgage saleable to an investor or the government, in some instances. Quite often a bank or lending institution will have just a few trusted appraisers they will hire to do their appraisals. This makes sense from their viewpoint, because often those appraisers will give them top priority, better prices, and quicker response time. Many lenders believe that an appraisal from any other appraiser is a waste of time.

Appraised value doesn’t always equal buyer value

Many realtors believe that the appraised value of a property can sometimes be an obstacle. There are many factors involved when someone is interested in purchasing a home. Often emotion is a factor. It may be a childhood home or in a neighborhood that has great sentimental value, or a buyer may want to bring children up in the same environment as they had.

Many other factors may influence a buyer, as well. From good schools and low crime, to convenient shopping or entertainment, there may be some highly desirable characteristics that do not increase the appraised value of a home but are very important to a buyer.

The bottom line is, if buyers are really interested in a home, whether for the reasons mentioned or for some other reason, they will not care what the appraised value is, as long as they have the funding or can get it.

The appraisal could be a waste of time and money 

Neither the lender nor the buyer will be interested in that appraisal, for the previously mentioned reasons. Also, you could pay anywhere from several hundred to several thousand dollars for an appraisal, depending on the property size and type, or the extra difficulty that may be involved. In the end, you may have a large, unneeded expense. Also, in a fast-changing market, an appraisal could become obsolete by the time of the sale.

Reasons to have your home appraised before selling

As you can see, realtors and lenders do not see any advantage in a professional appraisal when selling a property. The reasons they give have some merit and should be taken into consideration. But there are two sides to this argument. We also believe there are advantages to having an appraisal before selling your home. Here are some reasons.

An appraisal will give you an accurate starting point

If you have a thorough appraiser, who is detailed with all the factors that might make your home more attractive to a buyer, a written appraisal can give you a real advantage. Remember, appraisers are supposed to give an unbiased, honest account of the value of the property. They are not trying to help sell the home, unlike a realtor. While their conclusion may not agree with yours or your realtor’s, you can be assured that it is based on all the data they have accumulated on the property. They do not have anything to gain or lose from the outcome.

That being said, the appraisal results may come out more in your favor. You may be pleasantly surprised with the results and they may allow you a little “wiggle room” in your asking price. This flexibility can also benefit your realtor.

An appraisal may help your home sell more quickly

Having a professional estimate of the value of your home may also speed up the process with price negotiations. The buyer may be more willing to close the deal quickly if they see a professional estimate, knowing they are getting a fair deal and not wanting to lose it to another prospective buyer. In addition, the seller may feel more confident to stand their ground and not give in too quickly.

An appraisal may help you evaluate home improvements

If you are thinking about upgrading your home or making some home improvements, an appraisal can help you to know the value of your home and maybe help you focus on certain upgrades that may be more beneficial in selling your home when you decide to put it on the market. An appraisal can be done including these upgrades or renovations before they are done, giving you a good idea how much they will increase the property value. (Of course, if you do not follow through with these upgrades, the appraised value becomes void.)

  In conclusion, you can see that both sides of the argument present some solid reasons for and against having an appraisal done before selling your home. The final answer is that it just depends on personal preference and what you want to achieve. Realtors and lenders have some significant reasons as to why they think there is no need for the extra time and expense. However, you may think, according to specific or unique reasons, that having a professional valuation of your property may be advantageous for your specific situation. Hopefully, these justifications, whether for or against, will help you make this important decision.