In the current market place, sellers are finding the market comps, or the CMA (which stands for comparative market analysis) having results with very low averages. Usually, a listing agent will run a six month reflection of what has sold, what is contingent, and what is under contract as well as provide the active or current homes available on the market. Right now, since there have been a lot of short sales or foreclosures, all this activity does drop the values for all properties. This will also impact the appraisal report.
When the market was going up so quickly, everyone was pleased when their homes increased in value and most were happy to take out the equity, and used it to pay down cars, tuition, home repairs, or just to pay off bills and survive. Those sellers often are shocked when they get today’s CMA because usually they have an appraisal on hand from a not-so-long-ago refinance. Right away there is a huge gap between what they suspected the home would sell for and what the agent is saying the market will support.
I think it is worth the money for a seller to get an appraisal. It is a third party who is licensed and for the money you can get the most accurate measure of value. Sellers often forget they used up a lot of the equity in their homes in a previous refinance. Often, we are all trained to want to see a profit, and by this I mean taking cash away at closing. It might help a seller to remember the profit may have been realized already and that if they sell at the market price now and can break even, they may not have to feel so bad about the price point.
People do forget the profit was actualized when they took the second mortgage. The seller can do his/her best to save the most of any possible transaction by having an appraisal on hand. Most buyers would love to see the most recent appraisal because they also know the market is reflected there. It makes them feel secure they are not overpaying, and may even convince them to pay what it is worth instead of having a low and unrealistic expectation. This is why I think sellers do benefit from spending the extra money to get an appraisal. Sometimes, in unfortunate circumstances, when one can’t walk away at closing with cash, there may be other benefits that may mean more to a seller than the gain.
As agents, we want to bring the highest dollar to the seller if we are the listing agent. I would definitely remark here that even motivated sellers who price right have had to wait for buyers. There is a lot of inventory and competition, so “time” is really the critical issue even more so than price. Not all sellers can drop their prices to match the short sale market, and they do end up waiting longer.
As a seller in the past with my own property, I wanted to be able to try to get the highest dollar according to the comps, and priced too high. We hear about it and this is very tricky. When you build homes and know how much the material and labor costs are it is pretty hard to price a home under what you know the house is worth in just cost replacement value. Some houses, in my opinion, are just worth more than what the “fickle” comps reflect. It is true the buyers are predictable and don’t want to pay more than most are paying for a similar product, however, they should look closely at the costs of water, maintenance fees, and property tax rates.
The whole picture is not revealed in just the price tag of a home. In some instances, the value of a home is much greater if you don’t have an extremely high overhead, or reoccurring expenses. Homes in a great location, or ones that have a unique feature inside or outside, or with views, are definitely not always represented in a square footage analysis. Think of a CMA as a general guideline for what the buyers are doing, and a good indicator of what you will need to do to sell. The appraisal is a much closer look of your particular home and neighborhood.
Always make sure you ask your agent if a good comp is going to close prior to you ordering your appraisal as the new sale will help your home appraise higher. Please feel free to contact me if you ever want a CMA, or market comps. I will be happy to send one out. Aloha!
Diane Chavez, RS, ABR, GRI,