John's 7 Reasons For Pre-Sale Appraisals

Ordering appraisals on homes after they sell has been the traditional way of doing business, but ordering an appraisal prior to a home selling is, in my opinion, potentially a better way of practicing real estate. Doing so enables real estate agents to perform their various marketing, listing and selling procedures more proficiently, professionally and productively.

It also enables me to provide buyers and sellers with the highest level of consumer service, disclosure and protection possible. If appraisals are ordered prior to the sale then a tremendous amount of frustration, emotionalism, anxiety, delays in processing, renegotiating and terminating actions and substantial legal fees that are commonly associated with appraisal problems would be virtually eliminated.

Advantages to ordering appraisals on sellers' homes prior to their selling are:

  1. A pre-sale appraisal will provide a seller with a professional, unbiased opinion as to the value of their property.

  2. Lending institutions lend money (Mortgage) only on properties that have been appraised by a credit appraiser. (No appraisal, no mortgage).

  3. A pre-sale appraisal will result in faster buyer mortgage processing.

  4. Will allow ample time to appeal an appraisal if it comes in lower than anticipated.

  5. Will result in your listing selling much faster and with less stress.

  6. Could result in your listing selling for more than you anticipated.

  7. A pre-sale appraisal will eliminate complaints, mediations, arbitrations, threats of lawsuits, actual lawsuits and substantial legal fees.

Dropping a home's price bit by bit is the worst-case scenario for home sellers, weakening their position in a buyer's market, experts say.

It's the worst-case scenario for home sellers: to endure price cut after price cut until their houses become stigmatized and hungry buyers smell blood.

But how can you avoid the unpleasant situation in today's troubled housing markets? The answer, experts suggest, is to put your home on the market at the right price, and, if it doesn't sell quickly, cut the price deep and fast, so you won't be caught in a downward spiral of price reductions.

Not surprisingly, few sellers want to hear that advice. They'd rather price their homes aggressively and hope buyers will take the bait. But testing the market simply isn't a good strategy with home prices depressed, sales at a slower pace in many markets and buyers on the hunt for good details.

Buyers today are "looking at every aspect in so much more detail and trying to find out how they can get a lower price." The high-and-hope strategy is so ill-advised that some brokers won't accept listings they think are overpriced. They shy away from sellers who aren't realistic or won't commit to an automatic price reduction if no offer has been accepted within a few weeks after the home has been on the market.

Pricing is paramount

Pricing is especially crucial today because home prices have fallen drastically over the past two years and may continue to do so, albeit perhaps more slowly. Yet homeowners still cling to outdated beliefs about the value of their own home. A survey by real-estate information Web site found the 62 percent of homeowners believe their home had appreciated or held steady in the past year, even though sales data within The City of Kawartha Lakes indicates otherwise.

"We attribute this gap to a combination of inattention and a bit of denial that causes people to believe their home is insulated from woes of the market that affect others," says Stan Humphries, Zillow's VP of data and analytics.

Cuts may be counterproductive

A collective delusion may be but cold comfort for home sellers who suffer the consequences of mispricing their home. Overpriced home listings start out behind the market, which forces the seller to drastically cut the price or follow the market down through multiple price reductions.

Buyers, who are well-aware of the dynamic, will request a history of asking prices before they make an offer. A series of price cuts acts as a code "that signals to buyers that the seller is extremely motivated, and that knowledge empowers buyers to make lower offers and "stick to their guns."

A recent study "Seven Tactics for Selling a Home," published by Redfin, states this same point: "Once a property fails to sell at its debut price, the time it spends on the market can encourage buyers to become more aggressive in negotiating. Price reductions can further encourage aggressive bargaining; some difficulty is that while all homes are unique, comparable homes compete with one another for buyers' attention. If your neighbors reduce the price of their home, those homes are more likely than you're to be sold.

"You have to keep up and down with the Joneses." If your home has been on the market for several weeks without an accepted offer, you should reassess your assumptions and rethink your strategy, experts say.

Price cuts should be meaningful, so your home will "get the market's attention again." A series of smaller cuts, rather than one big one, can result in a slower sale and lower price.

Gimmicks seldom work

Sellers and listing agents sometimes try to entice buyers with incentives such as a buyer's agent bonus, big-screen TV or brand-new car. But experts say those extras don't work. Bonuses are ineffective because the cash doesn't accrue to the buyer, and it's unethical for agents to deliberately show higher-compensated listings in lieu of or before other homes a buyer might want to purchase. And as for buyers, given "a choice between $15,000 off the price or a new car, (they) want the cash." "Price is the No. 1 incentive."

Bottom line is that lower asking prices and price reductions are a painful yet unavoidable reality of selling a home today. In some cases, the pain is so severe that the seller has to bring cash to closing or sign a personal note to pay off an existing mortgage.

"If they are serious about selling, they have to adjust the price to whatever it has to be to get the property sold." If you're upside down (owe more on the home than it can sell for), but you can get out of it for 10,000 today, do you want to wait six months and get out for $25,000? That's what they need to think about.

"No one wants to make these tough decisions, so they do it in increments." "But eventually, you get to the same place."