DO I NEED AN APPRAISAL BEFORE I LIST MY HOME?
For
today's topic, we're going to talk about something that, oh, I don't want to say I get
emotional about, but I certainly get intense about, and that is the appraisals and
pricing your property properly. That's a little hard to say real quickly.
Now if you're listening to this podcast and you happen to own a home that's in a subdivision, and there are six-floor plans and 100 homes, and there have been 30 home
sales in the past year, well, you can tune out on this unless you've got a friend or a neighbor that might be in this situation because frankly, those appraisals are pretty
easy for anybody to do. Any experienced realtor could give you a real good idea
based upon similar homes nearby to you and what they would sell.
Now what I'm talking about today is appraising rural or country property, because the
reality of it is there are almost no two country properties that are the same. One guy
might have a home on five acres, another on 10, 20, or 40. One person might have a
pond in a stream, the other has nothing but dry pasture. One might have no
outbuildings whatsoever, but the other one has two or three outbuildings. One may
have facilities for horses, and the other one has outbuildings but doesn't have
facilities for horses and so forth and so on.
Not to even mention the fact that country homes, typically, aren't in a subdivision and
there aren't typical floor plans, and the distance you are from a paved road, they
make a difference, if you live on gravel, and a whole host of things that make it really
difficult, certainly far more challenging to appraise country property than homes in
subdivisions.
Now let me say this, there are some outstanding rural appraisers out
there that really know how to appraise the country property and know the differences
and can do an outstanding job.
If you're ever in a situation where you want to get an appraisal, why let us know.
We'll give you the names of some people that we've had nothing but great
experiences with them and you can rely on the information you get from them. Now,
we're talking about the situation where you're thinking about selling, and of course,
you don't want to get anything less than what you need for your property. Now you
can do what most people do, you can talk to a few realtors and you can probably get
a good idea from them what your property might be worth. But for the things I've just
talked about, it's difficult to really have anything you can count on.
Since it's a realtors', typically called the broker price opinion, it's not going to carry
near as much weight as an appraisal.
One of the things I want you to consider that if
you are planning on selling some property, a rural property in the future is that you
consider getting an appraisal from a really good experienced rural property
appraiser. Now I'm going to talk about the pluses and minuses and how you can use
that.
The reality of it is when that appraisal is done and you get it back, you're either going
to be thinking, "Well, I was right on the money," which typically isn't the case. You're going to find that it came in a little bit lower, maybe too much lower than you
wanted, or it came in exceedingly higher than what you anticipated it would. Well, if it
came in higher than what you thought it would, well, that makes everybody feel
good, right? That makes you more comfortable that you're going to get out of your
property when you finally sell it more than you had thought you would.
Even if it comes back in lower than you thought, it could still be a value to you
because if nothing else, it gives you a realistic expectation of what your property is
worth. Meaning you won't set a target out there for selling it that is unrealistic and the
market won't bear it. It also gives you a ground floor for negotiations. You're certainly
not going to sell it for anything less than what that property goes for.
Your realtor can also utilize that information to help them in selling your property. For
example, if, when it comes time to negotiate, if it's the lower one, you've got the
bottom line dollar that you can use in negotiation, say, "Look, we've got a recent
professional appraisal. We're not going to take less than it's worth." If it turned out to
be more than you thought, well, you can make hay with that too. You can share it
with potential buyers who are a little bit reluctant to pay the price, and you can show
them that the property is worth more than they thought it was. It certainly takes the
wind out of their sails if they're trying to negotiate a lower price than they probably
should have.
It puts you in just so much a stronger position to know what your property is worth. It
can also help you if you've got an appraisal when you're talking with realtors
because some of the things I hear people say are things like, "Well, why can't I just
use, oh, say Zillow or Trulia or realist?" or some of those other services out there that
are able or try to tell you that they know what your property is worth and you can just
look it up on a website. Well, again, those properties are probably okay if you've got
a home in a subdivision, but they are radically inaccurate once you get out in the
country.
Frankly, even for those of us who are in here in the greater Kansas city area, they're
not even really that good for homes in subdivisions. The reason is that the states of
Kansas and Missouri do not make results of a sale of real estate property available
to the general public. It's only available to someone who has an appraiser's license.
When you are getting an appraisal or a guesstimate, a price, for example, from a
realtor, they're taking it from the only source they have, which is typically the local
MLS. That's typically where Zillow is getting their information from.
In fact, if you go to Zillow's website and you search for it, you will find an area there
where they talk about how accurate do they think their estimates are for your given
area. As you look down through the list of cities, you'll see that, well, they think
they're 90% accurate in Los Angeles or 80% accurate in Cleveland. But when they
get to Kansas City, you'll see two lines across there indicating they don't guarantee
the accuracy of their estimates at all in this area because they know they've only got
a limited amount of information. They only know what's in the MLS, so they don't know about properties that are sold
for sale by owners, they don't know about properties that are sold from one friend to
another. They don't get listed on the MLS. They don't know about interfamily sales
when the father sells to one of his sons or daughters, for example. All that
information is missing. Zillow doesn't claim to be very accurate when it comes to
pricing homes in the Kansas City area. Then when you add to that, how difficult it is
to price property in rural areas, it really makes it almost impossible to put any faith in
the estimates you get from companies like that.
Having a professional appraisal makes all of that doubt go out of your mind. Having it
will also help you understand if the realtors are giving you the right price when you sit
down to talk with them about selling the property because sometimes it's really easy
to-- How shall I say this? Accept what you want to hear. If you've got two or three
realtors you've chatted with about what your property is worth, it's hard not to say
yes to the guy who says I can sell it for more, even if he or she knows that they've
overestimate just in order to get the listing.
Having a realistic price from the realtor who thinks that they can and legitimately will
sell it for that price, as opposed to just dangling a price in front of you in hopes that
they'll get the listing and then you'll have to adjust it later when the property doesn't
sell, should also make you feel much more comfortable.
These situations where you
get a professional appraiser will put you in a good situation because I have had
some horrible situations.
The other advantage of doing this is that you can help the eventual appraiser that will
come out from the lender because remember, things have changed a lot in the 12
years since the crash of 2008. It used to be that a lender got to pick and choose
exactly who they wanted to do their appraisal most of the time. That was because
they had confidence in them and they did good work and they turn things around on
a quick basis so they could move their closings along properly and quickly for their
clients. Sometimes you got a little bit too cozy, and so you had situations where
realtors and lenders were too close and they would talk too often.
Well, now, there's a firewall between lenders and appraisers. The lenders can't pick
the exact person that does the appraisal and they're limited in the conversation they
can have with them. All of this is a plus. It's to help us keep falling back into the
situation we had prior to 2008 where properties were overvalued. It allows rather
appraisers to be objective without fearing losing future opportunities to do
appraisal work. The problem with that then is if the lender can't guarantee that the
appraiser he sends out to you, is going to be experienced in rural property?
Now I think most appraisal companies try to match up the right people with the right
property, but I have seen some stunningly poor appraisals. I've seen appraisals
come back from somebody who is probably extremely confident in doing homes in
subdivisions trying to do a rural property. When I looked at the map, for example,
they didn't have the property even in the right location. They didn't know how to give
value to such things as a property that was fully fenced or that a property that was on
a gravel road. I had a situation a while back where this property was a beautiful home, had a
gorgeous pond, about 14 acres, a stunningly beautiful house, and they had an
outstanding outbuilding. This outbuilding was almost 3,600 square feet. It was set
aside or part of it was an office, it had its own septic system, it had its own heating
and cooling system and then it had the normal garage space that you see in
outbuildings. The appraiser had no idea how to properly appraise that particular
outbuilding, and so the appraisal came back way low. Both the buyer and the seller
recognize that the appraisal was way low.
I'm always fearful, concerned about appraisals being done on the country property for
that reason.
Now if you already have in your hand an appraisal from another
professional certified appraiser who did that when there was no contract involved
when you got that appraisal taken care of prior to putting your home on the market, it
makes it a lot easier to justify your position. In some cases, you can make that
appraisal available to the appraiser that is assigned by the lender. It helps them and
everybody gets a much cleaner, better, more accurate appraisal of your property.
Other than the cost, a proper appraisal is probably going to cost you a little bit south
of $1,000, but given the price of homes and property in the country these days, it's a
pretty small amount to spend. It gives you an amazing amount of confidence in how
you price it, and it gives you a tool to use both in negotiations and if you run into an
appraisal problem after the fact. If you were thinking about selling your property and
you've got a unique property, particularly one that's a rural property, give us a call.
We'll be glad to help you find and identify some rural property appraisers that you
can talk with that we'll be glad to give you an appraisal that will serve you well.
Well, that's our podcast for today. I hope you enjoyed it. I mentioned at the start of
this podcast that I am the luckiest man in the world. That's because I make my living
helping other people's dreams come true, so whether your dream is to buy or sell a
country property, give us a call.
We work to make it as easy and stress-free as
possible. We'd like to hear from you, so if you have a topic you'd like us to do a
podcast on or have any questions about rural real estate or country life, get in
contact with us. Send me an email at bill@ruralkc.com, or I'm so old-fashioned and I actually like speaking on the phone so you can
call me at 913-837-0760. But if texting is your thing, I'm cool with that as well.
Remember to check out our website, ruralkc.com.
We believe that's the best rural
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YouTube, Instagram, and Twitter. This is Rural KC Real Estate affiliated with Keller
Williams Realty Partners, wishing you a blessed day until next time.
