Should Every Seller Get Their Home Appraised?

Michael was recently quoted on the "Urban Turf" Real Estate Blog which discusses the need for sellers to have appraisals prior to listing their homes. Below is the text of the article:

Reality Check: Should Every Seller Get Their Home Appraised?

by Mark Wellborn

In an interview with the Washington Business Journal in early December, Long & Foster’s new president Dave Stevens noted that in order to manage sellers’ (sometimes unrealistic) expectations in the current climate, agents are encouraging their clients to get an appraisal before they put their home on the market “to give them a reality check.” We talked to a few area brokers and found out that there are varying schools of thought on this type of reality check.

Michael Dillon of DC’s RealAstute.com Home Team told UrbanTurf that his team started doing appraisals about two years ago when he felt like the market was starting to shift and sellers were being unrealistic about the value of their home.

“We decided that we needed some help in reining in sellers’ expectations,” Dillon said. “I can tell a seller that their house is not worth as much as they think it is until I am blue in the face but it helps to have a third party telling them as well.”

Dillon noted that there is only backlash from a seller if the appraisal numbers come back significantly lower than what they were expecting. If that happens, he sits down with the seller and explains that if the home is put on the market for much more than its appraised value, there is a good chance that there will be a price reduction down the road. This can often be a more expensive proposition than if the home was priced accurately when it first hit the market. If the seller insists on keeping the price high, Dillon goes with the price on the condition that he can lower it after a certain number of days.

“These days we won’t take a listing if the seller refuses to have it appraised,” Dillon said. “And most of the time, sellers are willing to do it. It is not as bad as it was a year or so ago when people were unwilling to wake up to the new realities of the market.”

Not all brokers are as wildly in favor of appraisals as Dillon.

“Managing the seller’s expectations is always key,” James Edwards of Edwards Realty told UrbanTurf. “Though truthfully, I put little faith in appraisers.”

Edwards’ qualm with appraisers is that when the market was going up, he believes that they would “appraise the house for just about any price.” This had the effect of property prices in some areas doubling in just a couple of years. Edwards thinks that this was because the appraised values were largely being made up.

“Now that prices are falling and the true value of a property is anyone’s guess, I tend not to rely on appraisers,” Edwards said. “They cost money, and as an agent, I’m going to prepare a Comparative Market Analysis (CMA) for the seller anyway which pulls from the same data.”

Edwards noted that his CMA is geared towards finding a price at which the house might actually sell, whereas an appraisal might come up with entirely different numbers that don’t exactly reflect the true market price of the house.

“If the appraiser comes back with a higher value than your CMA, then as an agent, you’ve just shot yourself in the foot and cost your client $350 to boot,” Edwards told UrbanTurf.

Regardless of where you might stand when it comes to appraisals, it sounds like the trend has not caught on across the area just yet. Dave Stevens estimated that just about ten percent of sellers are getting their home appraised before they put it on the market. However, if the state of the market remains uncertain, it will likely become a crucial part of a seller’s preparation.