Reader Question: Is it wise to have your house professionally appraised, before you talk to an agent about listing? I asked my banker for an appraiser’s name as a referral, and they suggested an appraiser they use for loan purposes. I was wondering if I could get closer to an asking price, rather than taking a suggestion from a real estate agent?
— Edward G.
Monty’s Answer: Approach your question by thinking “range of value;” which means the best price you can expect, and the lowest price you should expect. When you talk with several real estate agents as part of the process of picking an agent for you and your circumstances, they will each furnish their opinion of your home’s value and in most cases, each opinion will be different. Learn more about value at dearmonty.com/determining-a-homes-value.
Some sellers want to price their home to be the next one to sell in the neighborhood because they are in a hurry, others want to test the market and try not to leave any money on the table.
The three-agent solution
Ask three agents for a written estimate of the value of your property. Review their comparable sales and adjustments and then ask questions and challenge their conclusions. Use the average low-end and the average high-end of each agent to provide you a range of value. Just as importantly, using this approach allows you the benefit of evaluating them working before you hire one.
The trick in finding the suitable agents is that it requires work on your part. It is no wonder because a great deal of real estate agent training consists of how to prospect and how to convert prospects into customers. Many real estate agents are experts on conversion but subsequently fall short as the transaction progresses.
‘They seemed like such a nice person ‘
It is a mistake only to interview one agent. The National Association of Realtors (NAR) surveys show that about 70 percent of home sellers only interview one agent. Our findings suggest a notable percentage of listings new to the market expire unsold with the original listing agent. New listing expiration rates are noticeable even in healthy markets. Even super hot markets will have listings expire unsold.
There is a variety of reasons listing expire unsold and having several opinions is more work, but reduces your risk. Here are a few of the reasons:
The agent wants the listing. The sellers want an unrealistic price. Fearing the seller will shoot the messenger (which often happens) the agent accepts the seller’s high price, while thinking, let the market wear them down.
The agent mispriced the home. Agents tend to be optimists. They can get emotional for a property just like a prospect can. When this situation occurs, the agent will go to great lengths defending their belief, which is not in the seller’s best interest.
When agents have a relationship with the owner, it can influence or bias them. They are buddies, and they want the best for them.
The agent tells the seller the truth, but the seller wants no part of it. The seller insists on the higher price and the agent caves. The agent knows that three weeks later with no action, and the initial price discussion still top of mind, the seller may see the light. If the agent walks initially, they lose the opportunity.
Get the expert opinions — then you decide
In determining a home’s value, why do some homebuyers and sellers often abdicate the valuation responsibility? It may be because many homeowners do not know enough about appraisal techniques to question details. Another reason may be the home seller sees evaluation theory and calculations as being too hard to learn. For most people, learning the necessary rudiments is not hard. Learn about challenging appraisals here at dearmonty.com/challenge-real-estate-appraiser/
When you are selling a home
Gather home value information before you list your home or buy a home by attending open houses of similar property in the neighborhood. A side benefit of this activity is observing agents at work. By gathering open house data, your experience helps teach you about good comparables. This knowledge will add confidence to your review of the expert’s opinions.
Lastly, an appraisal is just one person’s opinion of value. Just one opinion is a significant reason a home seller should interview multiple agents, and a reason to become familiar with the key elements of an appraisal document.
— Richard Montgomery gives no nonsense real estate advice to readers most pressing questions. He is a real estate industry veteran who has championed industry reform for over a quarter century. Send him questions at DearMonty.com.