If you don’t want to know what your home is worth in an economically challenged housing market, you won’t like the answer to the question: “Do I have to get a home value appraisal?” Selling a house in a buyers’ market — or in a time of recession — leaves many with no option but to sell for a price below what they owe on their mortgage, or home loan. According to one of the top real estate destinations on the Internet, Zillow.com, home prices in 76 percent of areas they researched were falling, and more than 23 percent of homeowners had mortgage balances higher than the value of their properties [source: Ellis].
These numbers aren’t the most inspiring for those looking to sell their homes, but uncontrollable market forces are only part of the home selling picture. Even if making a profit or getting much out of the equity you put in is questionable, getting the most out of a home sale requires a really good faith effort on the part of the seller. You have some control over your home appraisal, and it begins with knowing what you’re up against and who will be tallying the figures toward setting a home price.
Selling a home means that, yes, you do need to get a home value appraisal, and it will likely cost anywhere from $180 to $450 or more [source: Harney]. But the good news is there are options for how you can go about getting an appraisal, including the following:
- Find an appraiser to help you determine the fair market value of your home.
- Research and set a price through your own research.
- Set a price and wait for an interested buyer to arrange a home appraisal through a lender or bank.
- Wait for someone to knock on the door and offer you lots of cash because they love what they see.
Getting an appraisal of your own, as the seller, setting a price and awaiting confirmation of the price from a potential buyer — and the buyer’s bank — is most often the way to go. But what happens if you don’t agree with the appraisal or the buyer’s bank doesn’t agree with your price? Let’s look at some options for increasing your home’s value or working with what isn’t working in your favor.
Working with the Value
It’s no secret that the huge number of overvalued properties at the end of the 2000s led to out-of-whack housing prices. Values are coming painfully back into alignment with market realities, but this process is proving to be a long one, requiring patience and creativity from those who need to sell without waiting.
A December 2010 overhaul of practices and oversight provides updates to the home appraisal process that looks to protect home buyers and sellers. With involvement from organizations like the Federal Reserve and Federal Deposit Insurance Corporation, the “Interagency Appraisal and Evaluation Guidelines” frame ongoing steps and responsibilities for ensuring that the practice of real estate appraisal and loan awarding is detailed and transparent [source: Federal Reserve]. These guidelines continue to endorse the longstanding Uniform Standards of Professional Appraisal Practice (USPAP) and educational requirements of the Appraisal Standards Board (ASB), and they publish a summary of what an appraisal should generally include as a minimum. Looking into the USPAP, ASB and having some familiarity with the new guidelines is a good idea when the home appraisal process gets underway.
Appraisers use comparative studies of homes that have sold in the vicinity of your own to determine what the market looks like. This Comparative Market Analysis (CMA) ideally has a sampling of properties very similar to your own. Unfortunately, this value is not so easy to adjust upward or downward because it comes from actual sales numbers. However, some argue that high rates of short-selling or foreclosures reflect poorly on “fair” market value, and sellers are being encouraged to keep an eye on the “comps,” or like homes, for those they know have sold at low prices due to the financial needs of the sellers [source: Hoak]. It is becoming more common to ask for another look from the appraiser, and maybe even a second opinion.
If you’re close to getting an appraisal for the price you had in mind, any number of improvements can raise you up after the comps come in. While it may not be worth it to start extensive rehabs or upgrades before seeing how much value is already lost through market forces, often a few hundred to a few thousand dollars worth of improvements can bring a value in line with a price a bank will agree to on behalf of a buyer.