You have decided to sell your home and have set an appointment to meet with your Realtor. There are many things to discuss during the listing consultation, but one of the most relevant today is pricing.
You may think that is obvious. After all, you will be looking at the comparable sales as a guide to determine the price you set for your home. But in today’s market, it’s even more important. Why? In most areas of San Diego County, we are experiencing an extremely low inventory of homes for sale – one to two months in many areas. This means that there has been a change in the market and not all appraisers are responding to that.
Appraisal issues are usually fueled by the difference between the price that buyers are willing to pay in today’s competitive market and the appraisals that are based on comparable sales that are two to three months ago. This is especially an issue for first time home buyers who are already competing with investors offering cash, over asking price, with no appraisal contingencies.
Sellers are often dealing with multiple offers in today’s market, giving them the opportunity to obtain the best price for their home, but also to negotiate the best terms. They may have the option to select between investors or first time home buyers; cash buyers, buyers obtaining conventional, FHA or VA financing. Whether or not your Realtor thinks there may be an appraisal issue is an important discussion to have.
Your listing agent must take the lead when it is appraisal time. I recommend meeting the appraiser at the property and bringing information about the market. If there are multiple offers on the property, that is vital information to convey. The listing agent should be knowledgeable about the comparable sales – were the extenuating circumstances that brought a low price (death on the property, condition, school districts, distress sale).
Sometimes, the issue is an appraiser coming from out of the area. It’s impossible for an appraiser coming from Orange or Riverside Counties to have knowledge about the individual communities in San Diego. Yet, we still see out of area appraisers completing appraisals in San Diego. This was brought about by the initiation of appraisal management companies (AMC’s) that most lenders are now using. These AMC’s often keep half of the appraisal fee charged (the fees used to go directly to the appraisers), and many appraisers are saying they can’t afford to work for half of the fee. So, you may be getting the cheapest and fastest appraiser. You may not be getting the best appraiser, one who knows your local market.
My advice, price your home based on the most current market data and keep in mind that there may well be appraisal issues in today’s market. Be ready for that possibility and have a plan to deal with the situation if it does happen. An experienced listing agent can help you every step along the way.