The quick answer to it is, no you don’t have to get an appraisal—an estimated value of your home done by an objective third party—before selling your house.
If you’re thinking of selling your home and would like to know how much to list it for, I would recommend that you get a comparative market analysis (CMA) done instead of an appraisal.
A comparative market analysis (CMA) may be worth looking into before you put your house on the market.
A CMA is a report with a price opinion of your home that a local real estate agent can create for you.
To create a CMA, the real estate agent will look at all prices of very similar homes to yours that have sold in your area in a recent time frame, often 90-130 days, to determine the price you should sell your home.
One advantage of getting a CMA instead of an appraisal is that real estate agents often do CMAs for free, while appraisals can cost you anywhere from $300.
Another advantage of CMAs is that a real estate agent can get this report to you within a day, but an appraiser can take more than a week to appraise your home.
If you’re in a hurry to sell your home, doing an appraisal could delay the sale process.
That said, there are situations when it could be in your best interest to do an appraisal before selling your home.
I’ll go through some of them below.
When Should You Consider Getting an Appraisal before Selling Your House?
Under these circumstances, you can hire a professional state-licensed appraiser to give you a home valuation:
You Don’t Agree with the Real Estate Agent's Estimated Price of Your Home
Once you receive a CMA from your agent, you may have concerns that they have priced your home too low or too high.
This can happen if you’re dealing with an unscrupulous real estate agent who will come up with a price they think you’ll like just to get you to list your home with them.
To ensure you get an agreeable price opinion of your home, I suggest that you get at least three experienced real estate agents to give you a CMA.
Most of the time, the value they give for your home will be more or less the same.
However, if they come back with very different valuations, for example, $750,000, $830,000, and $1.1M, you should seriously consider hiring an appraiser to get a fair evaluation of your home before listing.
You Live in a Very Remote Area or Somewhere Not too Many Homes Have Sold Recent
As I have mentioned above, real estate agents look at the prices of homes sold or listed recently in your area to determine your home's worth.
If the agent has no sold homes to compare your house to because the real estate market in your area is slow they’ll have a difficult time estimating a fair market value for your home.
An appraiser, however, has more experience valuing homes than a real estate agent.
They can, therefore, accurately determine your home's worth using prices of similar homes recently sold outside your area, the value of upgrades and renovations you have done, home features, etc.
A real estate agent may also find it hard to price a home with unique features such as fingerprint-accessible closets, environmentally friendly building materials, zip lines, tunnels, music studios, luxurious interiors, a basement bowling alley, etc.
So, if your home has unique features, having it appraised by someone specially trained to value property will help you not overprice or undersell your home.
You Plan to Sell the Home Yourself
This is commonly referred to as For Sale By Owner (FSBO) in the real estate industry.
One of the reasons people use the FSBO option is to avoid paying real estate agent commission, which is approximately 6% of the home sale price.
While you’ll be saving money, the FSBO process can be stressful, especially if you have never sold a property before.
The first and most important step in the for sale by owner process is knowing your home’s worth.
If you don’t do this right, you could over-price your home, which could keep it on the market for months, or undervalue it and walk away with less money from the sale.
Because you won’t be using a real estate agent, approaching them to give you a CMA may not be the right thing to do. So, getting a pre-listing appraisal is the best option for you to get a fair market value for your home.
Whatever reason makes you choose to appraise your home before selling, you should know two things:
So, for example, an appraiser can value your home at $500,000, but that doesn’t mean you can sell it for that much. Market conditions may price your home at $400K or higher at $660K.
Well, if you have a potential buyer who is offering you cash for your home, they might not be interested in an appraisal.
Also, if a buyer is purchasing your home through a mortgage, they cannot use your appraisal to qualify for the loan.
Their lender will perform their own appraisal to verify your home's worth before deciding whether to offer them the mortgage to buy your property.
So, keep your wallet closed and leave it to potential buyers to do their own appraisals of your house.
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