“One of the more common and costly mistakes I see a lot of sellers making is high-balling the sales price in a high-traffic community."
– Dave Vadurro, Chief Appraiser, Nationwide Property and Appraisal Services
We recently asked some of our valued realtor partners for topics this blog might be able to help tackle for use as an educational resource to your clients. A common topic requested was one that helps cover how to price our home for sale by understanding the imperativeness of the appraisal for mortgage- related transactions. With that in mind…
Why is the appraisal so significant for selling my home when mortgage financing is involved? If the buyer is willing to pay what I want to sell it for, what’s the issue?
As a homeowner, we all have certain goals for the sale of our home. We believe that based on what we bought it for we should be able to sell it at a certain price to recoup our costs and earn a profit, or we might feel the money we invested in renovations should garner a higher sales price. However, in order to truly price our home to sell at a competitive value we have to be willing to remove our personal bias and deal only in facts – and the facts are that that the appraised value of our home will be more in line with the recently sold values of other homes in the neighborhood above everything else.
The most basic tenant of negotiation we learn for the sale of anything is to start the bidding high and negotiate downward. However, as Dave Vadurro, Chief Appraiser at Nationwide Property responsible for overseeing 8,000+ appraisals a month says, “This is one of the most common and costly mistakes people make. Sellers must understand that when a buyer necessitating a mortgage looks to buy a house, they will only be eligible for a loan amount based upon the the lessor of the appraised value of the home or the purchase price.” Think about it from the bank’s perspective, when lending funds for the purchase of the home their only security until the borrower repays the loan is the home itself. The safest way for the bank to protect themselves until that time is to value the home based on an impartial third party analysis of recent comparable sales for multiple similar properties, rather than one individual opinion of the price a buyer is willing to pay for your property. So for example if we set the sales price of our home at $275,000, but the appraised value comes back at $250,000, then the prospective buyer will have to come up with the additional $25,000 in cash or pay higher interest or fees to buy our home. In most scenarios, this is an immediate deal-breaker.
With all of this in mind, as sellers there are a few actions we can take to overcome any potential barriers and ensure competitive bidding on our home. First and foremost, secure a relationship with a reputable realtor and trust in their guidance. The reason we enlist in the services of an agent and pay the commissions we do is to utilize their expertise for selling our house at the best price possible. Great realtors will have an in depth knowledge of the market they serve, a timely awareness for the buying activity within your community and seasoning for capturing the most value for the sale of your property. In the same way we might ascertain the services for a good doctor, lawyer or wealth advisor to help navigate us through scenarios we are less than proficient, so must we rely on our agent – if you do not feel confident enough to do this with your current agent, find someone else.
One other tidbit of advice Vadurro shares with us is to have all your receipts handy for any renovations or major upgrades you have made to the home since purchasing the property. While we cannot attempt to influence the appraiser’s valuation by insinuating a desired appraised value, we can share all the work that has been done to the home since moving in.. “Kitchens and bathrooms tend to generate the most added value to the appraisal of the home. If you have records for the work you’ve done it’s helpful to the appraiser to see and incorporate that information into their review.”
Selling our home can be both an exciting and stressful event - the years of paying down the mortgage and earning equity on the property is finally coming to fruition! However, we must be diligent. If we wish to extract the most value from our efforts and cross the finish line with a smile, we must set aside our opinions rooted in the emotional roller coaster of the deal and entrust in the guidance of experience specialists.
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Together in Success,
Matt Weaver
The views of this blog, "Your Morning Shot" podcast, and on this site in general are solely those of the authors, Matt Weaver (NMLS-175651) and Zack Lewis, and do not express the views or opinions of Finance of America Mortgage.
