The decision to sell a home is not one that many people take lightly. One of the first things you want to know is how much your home is worth. You want to have an idea of your home’s value for a few important reasons, such as:
- Can you afford to sell your home?
- Will you make enough profit to afford your next home?
- What is a fair market price to ask for your home?
Knowing What Your Home is Worth
Your real estate agent can help you determine an approximate value for your home based on what equivalent homes are going for in the Central Florida area. However, for the most accurate appraisal, and typically the one required by the buyer’s mortgage lender, is the appraisal that is done by a licensed Florida appraiser during the sales process.
You could choose to have an official appraisal done before putting your home up for sale. However, it could be an unnecessary expense, since the buyer’s lender will want to have one done by their chosen appraiser. And in today’s competitive and volatile market, getting an appraisal done too soon because the value may not reflect the market value of your home.
Difference between Real Estate Agent vs. Appraiser
As previously stated, a real estate agent can tell you what your home is worth according to the local real estate market. He or she may advise you of what improvements you can do to add value to your home and those you might want to avoid because they won’t give you added value before putting it on the market. The agent will use what is called comparative sales or “comps” to pull data regarding comparable homes recently sold in your area to determine the market value of your home. The data the agent compares includes:
- Age of the home
- Size of the home
- Type of construction
- Condition of the home
An appraiser is hired by the buyer’s mortgage lender to be an unbiased third party that stands to gain nothing with providing an accurate accounting of the value of the home and property. While a real estate agent’s valuation of your home may be entirely spot on, most lenders require an independent appraisal to keep an even playing field.
Similar to an agent, an appraiser will also use comps to help determine the market value of the home at the time of sale. But they are required to physically inspect the property and gather data, which includes:
- Measuring the home and any other structures on the property
- Photographs of the exterior and interior of the property
- Information about the condition of all structures
- Information about the property’s intended use
- Characteristics that might impact the value of the property, for example, if it is near a noisy road or behind the loading dock of a busy store
Appraisal vs. Market Value
A home appraisal is often lower than the market value of a home, even in a seller’s market. A lender is usually more interested in the appraised value of the home versus its market value because the market value is basically what a buyer is willing to pay for the property. This value is often influenced by buyers’ emotions and the competitiveness of the areas’ real estate market. In a real estate market where there is low inventory and many potential buyers, it is easy for buyers to get caught up in bidding wars and pay over the appraised value of a home because they want it no matter what.
So, a home appraisal is an unbiased professional opinion of your home’s value. The buyer, but mainly the mortgage lender, uses it to determine whether the contract price is appropriate based on three main factors:
- Condition of the home
- Location of the home
- Features of the home
The lender requires an appraisal because they want to make sure that the buyer is not overborrowing on a property that may not be worth the sale amount. Why? Because typically the home will serve as collateral for the mortgage loan. This protects the lender in the event that the borrower defaults on the mortgage and the property goes into foreclosure.
When a foreclosure occurs, the lender would sell the home to attempt to recoup the money it lent for the purchase of the property. Therefore, if the home were to have a lower appraised value than the amount requested for the mortgage, the lender would deny the amount requested because they are not willing to take the risk of losing money.
What Happens If an Appraisal is Not What You Expected?
Unfortunately, there are instances when an appraisal may fall short of what was expected. This could cause a delay in closing the sale. In a competitive market, some buyers are willing to waive the difference between an appraisal and offer price up to a stated amount and make up the difference out of pocket. In some cases, you may be asked to be flexible with your price. This is where you can benefit by having a real estate agent who is skilled in negotiating on your side and is ethically bound to act in your best interests.
You can depend on the experience of Palmetto Realty’s real estate agents to help you navigate the sale of your Central Florida home from start to finish. Contact us today!