For many people, part of the process of buying a new home involves selling their old home. And the key to getting a fair price is first determining the home’s fair market value.
There are many consumer websites available that can help you estimate how much your home is worth to give you a solid idea of what you might expect to sell your home for based on the location, size, age and condition.
Sites like Zillow.com make it quick and easy. You just fill in your address, and in seconds, you’ll have an estimate of your home’s worth based on real sales and what other homes are listed for in your area. It also gives you the option of contacting an agent for a free professional estimate. If you don’t agree with the “zestimate,” check the facts on your home. They could be wrong or out of date.
Other sites that offer similar home-pricing services include:
These sites are also useful for determining the approximate values of homes you may be interested in purchasing.
Getting an Appraisal
Not all sites provide the same home values, so it’s good to get a second (and maybe third or fourth) opinion. For example, a professional appraisal will provide a more exact determination of the actual value of your home rather than an approximate price range within to sell. Appraisals generally run between $300-$400 and will be required by your buyer’s lender because the lender will want to make sure they don’t lend too much (many lenders won’t loan more than 90% of the home’s value), and therefore protects the buyer from paying too much for a home.
The main type of appraisal used for homes is the sales comparison approach. The appraisal approach compares the property with three or four similar properties sold recently in the area, comparing specifics such as lot size, square footage, style and age and other amenities (outbuildings or finished basements, for example). The appraiser doesn’t physically inspect the other properties; he or she refers to real-estate listings and county public records of house sales to gather comparative information.
There are other ways to appraise properties, such as the cost approach, which is used when it’s difficult to find recently sold comparable properties in the local market, a more likely case with non-income earning public buildings like schools and churches.
What if your appraisal differs from what you’d like to sell your home for?
There are several reasons why this could happen. Are you “underwater” on your home? This happened to many as home values plummeted when the housing bubble burst, leaving them with outstanding mortgage balances higher than what their homes appraised for. One way to try to recoup some of the money is by offering a price above the appraisal. On the other hand, if sellers need out of their house quickly because of a sudden situation, like a job transfer to another city, they may choose to sell for lower than the appraised value. Other factors like the surrounding housing market may affect values—a “hot” market may force an appraisal to be too high, while it may be too low in a “down” market.
But the appraisal is important because it’s the basis from which the lender determines how much money they’ll be willing to loan a homebuyer. So what do you do in this situation?
- Get a second opinion from another home appraiser approved by the mortgage lender. Mistakes could be made and found with a new set of eyes. (Vantage Credit Union has a list of approved appraisers we trust to provide fair and unbiased appraisals. Ask for details).
- If the appraisal is higher than your asking price, great deal for you! But if the opposite happens, you may need to consider reducing your asking price, or asking the buyer to split the difference with you if the difference isn’t too big. Or, you could agree to provide upgrades or do repairs in exchange for your higher asking price. There are ways to make it a fair deal for both you and the buyer.
The professionals at Mortgage Solutions, LLC, * can help you navigate these waters. When you’re ready to sell and move into your next home, be sure to give them a shout.
4020 Fee Fee Road
Bridegton, MO 63044
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Mortgage Solutions, LLC, is a wholly-owned subsidiary of Vantage Credit Union.
NMLS #277481. Missouri Residential Mortgage Licensee #17-1908; Illinois Residential Mortgage License #MB.6760773; Kansas Licensed Mortgage Company #MC.0025070.
Equal Housing Lender.