Over the last few weeks I have seen home price increases in our area. Not on all of the homes of course, but it seems that sellers have caught on to the fact that there are a lot more buyers than there are homes for sale. It can be very tempting to take advantage of this type of market and price your home higher. As a seller, you want to maximize your profit and capitalize on a quick sale. There is absolutely nothing wrong with that. But I have one word for you: APPRAISAL.
When I am working with my seller clients, we have a detailed discussion on what their home is worth in the current market and in their neighborhood. We look at updates and improvements that they have done, we compare recent sales and other properties currently for sale. I take an in-depth look to make sure we are pricing the home to sell for top dollar but also take great care to price it so that it will appraise. That way, the transaction doesn’t collapse 2 to 3 weeks into the process.
Why does it have to appraise?
The buyer’s bank won’t approve a loan that is more than a home is worth. Here is a scenario:
You list your home for $500,000 even though recent sales in your area show an average price of $475,000. You may have a few features the other homes don’t have but even still, the appraiser values your home at $485,000. A $15,000 difference. There are three options at this point:
One, the buyer can walk away and you have to re-list your home.
Two, you can drop your sales price to match the appraisal and the transaction continues as scheduled.
Or three, you can negotiate with the buyer to meet somewhere in the middle. You drop the price a little and the buyer brings extra cash to the closing table to make up the difference.
But here’s the thing, depending on the price point of your home, typically, buyers don’t usually have *suitcases* full of cash to make up the difference if the home does not appraise.
Rather than take the risk of your home not appraising and then having to start the process all over again, it makes better financial sense to price it right from the start. Especially when you go to put your home back on the market, you are going to have to lower the price anyway so that you don’t run into the same scenario again. And putting your home back on the market after having it under contract raises questions with buyers and their agents.
Make sure you have your agent show you the recent sales and please do not rely on Zillow for your home’s value, it is computer based model and not necessarily accurate for your neighborhood.
If you are curious about you’r homes value or have any questions regarding buying or selling, contact me at firstname.lastname@example.org or call/text: 703-434-9027. I would love to hear from you!