Should you order an appraisal before you list your Michigan home

How do you arrive at the right listing price for your Michigan home?  It is a fine line between listing it too high and the right price.  If you list it too high your home will just sit without any offer.  Then you will have to lower the list price, but then you will have missed out on the hottest buyers.  They are not coming back to see your house after you have lowered the price.  They have already formed an opinion that the house is over priced and not for them.  It is rare for a buyer to come through a second time.  The goal is to list your home at the right price the first time.  Once in a while I have a client ask “should I order an appraisal” before I list my Michigan home.  Hello, this is Russ Ravary with another addition of Michigan home selling tips.  First of all let me explain what an appraisal is when you have an appraisal done by a licensed state appraiser.

An appraisal is one appraiser’s opinion of the value of your Michigan home.  It doesn’t matter if it is a home in Garden City or a lake home in Oakland County Michigan they all use the same universal appraisal form.  Every appraisal on a home is different because it is one appraisers opinion and they may have arrived at the value using different comparables than another appraiser did.  It would be rare that different appraisers will give the exact same value for a home.  If you hired three different appraisers you most likely would get three different values for your home.  It is just their opinion of value based on their research.  They may use different sold homes as comparables.  On an $800,000 home we had 3 different appraisers give appraisals varying form $650,000 to $795,000.  3 widely varied appraisals.

Here is basically how a licensed appraiser does their appraisal.  The appraiser usually looks for sold homes in the area that sold in the last 6 months, with the similar style, and close to your lake home.   They like to look at lake homes that are on the same lake and will not use homes off the lake.  So if your lake houseis a colonial the appraiser is going to look for other sold colonial lake homes in your area.  An appraiser is going to make comparisons and adjustments based on these factors and some other ones.  The major ones they look at is:

• • Square footage

• • Number of bedrooms

• • Number of bathrooms

• • Garage & size

• • Basement, type & finished or unfinished

• • Lot size:

The appraiser is trying to compare apples to apples.  They care about the structure, size, and numbers.  They really do not make adjustments for how nice or how neglected the home is.  Or if they do it will be a small adjustment.  It is no where near what a real estate agent would adjust for.  The appraiser comes up with a figure of what they feel your home is based on the basic elements of the home.  They do not figure in the condition in most cases.  The appraiser is looking at more at the numbers of the house and basic structure, and not condition.  Their major adjustments would be for square foot, differences in number of bedrooms, bathrooms, and garage sizes from the subject house versus the sold house.

So the difference is that a realtor’s market analysis (CMA) or value opinion takes into a bigger account the condition of the home where an appraisal does not.  In the last 10 years a Michigan homes condition has a HUGE impact on the sales price or value of a home.   A fixer upper is not very desirable and the sold prices reflect that.  A 1200 square foot home that needs updating you will see a $10,000 to $30,000 difference between what the top updated move in ready homes sell for and what a fixer upper sellers for.

As the square footage of the homes get bigger sometimes the spread between fixer uppers and move in ready homes is even more.  I have seen homes that just needed a paint job sell for a $10,000 less.  So the condition of a home impacts the value the buyer puts on it and the price the home sells at.   So sure a house can appraise for a number, but it may never sell for that price because of the condition.  If an appraiser is not taking into account how nice the home is or isn’t then the appraisal is not a true indicator of what your home is worth.  Yes, it does tell you what they feel it is worth and what a bank would loan on it, however it is not a indicator of what a buyer would pay for it especially if the home needs work or is in excellent condition.  Sometimes buyers will over pay for an updated move in ready Michigan home.

So yes you can pay and have an appraiser do an appraisal but it is not a true indication of the market value or what a buyer would pay for it.  Use it as a guide and also listen to what the real estate agent says the home is worth.  After all it is all about what a buyer is willing to pay for it.  I hope this edition of Russ Ravary’s Michigan home selling tips helps you understand the home selling process better.