Estimating your property’s fair market value depends on a professional appraisal and a professional home inspection. First, it takes you to a realistic space. It lets you know whether a prospective buyer is lowballing you and, conversely, avoids disappointment because your asking price is too high.
Second, lenders rely on appraisals like a newborn infant does its mother’s umbilical cord. They calculate the initial funding and the refinancing from an appraisal base before anything else. So, wrap your mind around these vital activities sooner rather than later. It doesn’t matter whether you’re marketing your home through a realtor or selling to a cash buyer; they come into play.
What does an appraiser do?
Professional appraisers should be licensed to give valuations. Sometimes, home cash buyers may have extensive appraiser experience, but the license has lapsed. That’s a significant advantage (as we’ll see lower down). Nonetheless, we recommend that you do your due diligence or get a second opinion if you want to pinpoint the current pricing.
Here are the things you need to know about appraisals and how they can equip you to negotiate the home pricing accurately:
- A central theme of every appraisal is the location of your home and how it compares to sold prices in your neighborhood.
- Interestingly, in a hot real estate market with prices moving up quickly, there may be residences in contract or pending at dollars per square foot higher than the recorded metric for concluded sales. So, suppose you feel the higher prices are coming down the pipeline. In that case, you may want to delay or postpone the appraisal to get better comparatives under the belt.
- On the other hand, if values are drifting down, you want to get your appraised value in as quickly as possible.
- Other constructs that enter the equation are:
- The assessed value – the number the tax collector uses to determine the home’s annual property tax. Traditionally, the assessed is lower than the appraised value – sometimes significantly.
- The property size of the lot, construction facilities not under air (e.g., patios and garages)
- Upgrades, remodeling, and add-ons.
- Swimming pools.
- The overall condition of the home and signs of defects.
We need to pause for the moment on the aspect of “overall condition.” In most real estate transactions, the buyer insists on sending over a home inspector to look for issues not easy to notice with the naked eye. The latter overview is significantly more detailed than any appraiser inspection:
- Appraisers look for peeling paint, HVACs straining, faulty doors, broken windows – anything transparent in a two or three-hour walk-through.
- Conversely, home inspections go deep. They may find severe mold contamination, foundation cracks, electrical faults, behind-the-wall plumbing faults, etc. As these emerge, they could bring the appraised value into question.
Appraisal and home inspection timing
There’s a shortage of appraisers post-COVID-19. Indeed, It may take weeks to get one out to your house independently. However, mortgage companies generally do things faster with a dedicated appraiser pool.
Home inspections are easier to access but can cost you a few hundred dollars to know precisely what’s what. This brings us to the most crucial appraisal considerations when selling your home with (a) a realtor and (b) a home cash buyer:
Selling with a realtor.
After receiving the buyer’s offer to purchase but with a loan in the cards – here’s the thing:
- Let’s suppose that the offer is for $200,000 where the buyer expects the lender to fork over 70% of the offer price, or $140,000. It leaves the buyer to invest $60,000, thus making the offer whole.
- Let’s assume the appraiser values the house at $180,000. So, in this case, the bank is only prepared to fund $126,000 (i.e., 70% of $180,000).
- It affects buyers in two ways: (a) They’re short by $14,000 to make up the difference to stay at $200,000 (i.e., on the original calculation of $60,000 buyer input). (b) It may indicate that the offer was too high, draining enthusiasm for the deal.
- If the buyer wants to continue but doesn’t have the extra $14,000, and the seller isn’t ready to compromise on the original offer, the deal will likely collapse.
Making matters even worse, a detailed home inspection after the appraisal – a contingency in the offer – uncovers (say) another $6000 of latent damage (which the buyer asks the seller to remedy). So again, the picture is one of the sellers coming to terms with a potential reduction of the original offer (a total of $20,000 in our example).
If the buyer is a cash buyer, the appraiser disruption shouldn’t occur. Although cash offers are more common these days, they’re still in the minority in most market areas. The takeaway is that buyers shouldn’t depend on the original offer price as final. Home inspections and appraisals can drill alarming holes, making deals shaky close to when you expect to see the buyer’s money in your bank account. The appraisal and home inspection kick in close to the end of a six-week realtor cycle (on average).
Of course, every deal with a realtor includes the seller bring responsible for realtor’s fees and other closing costs. These will further reduce the original offer price (sometimes by 10%). However, they’re unavoidable under this heading.
Selling to a home cash buyer.
We advise only dealing with home cash buyers who can demonstrate extensive appraiser experience, even if not licensed. Moreover, they must be confident enough to deploy this skill, applying it to their offer with proof of calculation. Also, home cash buyers have home inspection resources to do an overview before submitting a cash offer. Therefore, with no mortgage lender involved, your first offer is your final offer, and you can close within seven days of meeting the home cash buyer for the first time. No shocks or surprises that whittle the starting offer and your expectations down.
So, with a cash buyer’s appraisal-centric approach, you’re not getting a lowball proposal showing little resemblance to neighborhood comparisons. Also, much of the 10% and closing cost items (mentioned above) don’t figure in under this heading. Instead, home cash buyers use the fee savings to fill in their profits and some additional convenience reductions.
Understand that conveniences, with no extraordinary penalties, can be significant. There’s no need to:
- Remodel or renovate to get the home show-ready (a considerable dollar expense)
- Create curb appeal, declutter, or stage the home (all cost money).
- Rearrange the kids, pets, and schedules for showings.
Further, if you’re falling behind on mortgage payments, have liens on the home, or experiencing spouse divorce issues, home cash buyers can significantly smooth out the wrinkles. They’re fantastic for renegotiating liens down to cents on the dollar and getting a settlement with your lender. Moreover, fast closings resonate strongly with divorcing couples.
So, there you have it. Home cash buyers can substantially create a seamless home seller experience, making the best of appraisal and home inspection actions. Under the right circumstances, they remove tremendous aggravation from the home marketing process. You can still get a price that makes sense yet save weeks of ups and downs that invariably end in seller’s remorse and disappointment. Companies like Home Buyers Birmingham (Alabama) promote their home appraiser skills, so you know their offers are realistic and legitimate. Therefore, if you live in the area and find yourself traveling a rocky journey with all the things mentioned in this article draining your enthusiasm, give Home Buyers Birmingham a call.
Home Buyers Birmingham
1821 11th Avenue South Suite #55331
Birmingham, Alabama 35205