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Posted at 05:30 AM ET, 05/02/2012

Should you get a professional appraisal before putting your house on the market?

Special to the Washington Post

Pricing a listing is one of the hardest— and perhaps most important — tasks in residential real estate.

Sellers can get it wrong in either direction: If the asking price is too low, the sellers might end up leaving money on the table; if it’s too high, they won’t tap into the right target group, will lose a lot of time and may then end up selling for even less.

Sometimes, the seller and the agent might not agree on a price. And even if they do, the sellers might look for some “objective” method to corroborate their number. That’s why our listing clients frequently ask us if it’s a good idea to get an appraisal before they put the house on the market. But should you?

Well, it depends on your reasons.


(Photo illustration by Catarina Bannier)

Chris Connors is a Bethesda-based independent appraiser whom I met years ago when he was working with a large credit union, and he often gets hired by potential sellers. Usually, the owners come to him because they have talked to several different agents and got very different suggestions for a price from them, he said.

Just a couple of days ago, Connors said he finished an appraisal on a house where the seller had previously interviewed two realty agents. The first one suggested an asking price around $800,000, the second one was closer to $1.1 million.

“The seller was quite angry with me,” Connors said, “when my report supported the first estimate, and I told him the other guy just wanted to get the listing.”

In cases like that, just like in limited-service or for-sale-by-owner situations, a full professional appraisal might be an important reality check. The same might be true for buyers who are not represented by an agent and need to make sure they won’t overpay.

In most other scenarios, however, I cannot recommend a pre-listing appraisal. In fact, for the seller, it might just be a waste of money. Here’s why:

●There’s no such thing as an objective valuation. My veteran colleague Bonnie Roberts-Burke, who used to teach pre-licensing classes, reminded me of the textbook definition of an appraisal: It’s an “opinion of value.” That pretty much says it. There are a lot of ways, techniques and choices appraisers have available to support that “opinion” with facts, but it’s an art rather than a science. Even the most experienced appraiser will admit that there’s often an element of gut feeling that can’t be quantified. Hire three appraisers, and you’ll get three different values. “It’s not the appraiser that determines what the house will sell for,” Bonnie said. “it’s the market.”

In distant suburban areas with large, newer subdivisions (and dozens of similar houses) it’s easier to be objective, especially when there have been similar sales in recent months. In a place like D.C. and its suburbs, though, the housing stock is older and no two houses, blocks or neighborhoods are alike — nor can they easily be compared.

●Your agent might do just as well, or sometimes even better. Typically, they have access to the same information (comparable sales, MLS data, tax records) the appraiser uses. But they also might know their particular market niche better and might have actually have been inside the “comps.” Their written analysis might not be as structured and uniform, but it will cast a wider net and put more emphasis on the surrounding market conditions.

The slowdown in the market hasn’t made things easier. The inventory has been frustratingly low. When there have been few recent sales to get clues from, it’s hard to predict for either your agent or an appraiser what a buyer might be willing to pay.

●Your buyers will not care. They will want their agent to analyze the comparable sales as well as the specific qualities and features of the house and neighborhood. An appraisal procured by the seller is often seen as meaningless and biased, no matter how solid and well-founded.

Chad Loube of First Place Bank in Rockville recently explained to me that he has more buyers ask him for names of trusted appraisers even before they made an offer on a house. Sometimes, this happens when the buyers consider an escalation clause in a multiple-offer situation. Even if they’re willing to pay a lot more money for the place they fell in love with, there’s no use in putting that on paper only to have the deal fall apart over a low appraisal many weeks later.

●The buyers’ lender will not be interested in your appraisal, either. They will always order their own, either because they need to protect themselves and will only trust a handful of proven appraisers, or because it’s required to make the mortgage saleable to investors (or the government) afterwards. It’s a common misconception that an appraisal ordered by the seller will “save” the buyer that step.

“There’s no added value from having a pre-listing appraisal,” said Wells Fargo loan officer Billy Kinberg, “because it doesn’t predict much.” To him, the contract price is a much better indication of true value as it reflects what two parties have agreed upon in a free market. And exactly that piece of the puzzle will not be available to the appraiser until after a contract has been signed.

In the current mortgage climate, lender-required appraisals are a major reason for transactions not to go to closing. They were almost a formality five years ago; today, they can be the deciding factor in making the move happen or not.

●We are in the middle of a fast-changing market. If you get an appraisal now, it might be completely obsolete by the time your house actually sells. The upheaval of the past couple of years has shown that new comps, new government policies or increased interest rates all can change the picture very quickly.

The bottom line is, if you believe your agent is totally wrong about what he or she thinks your house should sell for or if you’re selling without a broker altogether, then by all means, get an appraisal.

Otherwise, hold onto your checkbook and leave it to the buyers to get their appraisal.

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Catarina Bannier is a real estate agent with Evers & Co. and a blogger on DC House Cat.

Do you have an expertise in a neighborhood or part of the real estate market in the Washington metro area and want to write for the Where We Live blog? E-mail us at khazano@washpost.com.

By Catarina Bannier  |  05:30 AM ET, 05/02/2012

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