Appraisals are primarily used to protect the lender's interest in the
property. Just like lenders can be hesitant to issue a mortgage to
credit-risky borrowers, they don't like to underwrite properties for more
than they're worth. Appraisals also are used when other factors have made
it difficult to assess your property's value, such as a lack of real estate
activity in your area.
REALTORS® stress the importance of understanding that an appraisal is just
the opinion of a trained professional: Five different appraisers could
attach five different price tags to your home. Appraisals are based on past
sales data, the location of the home, the size of the lot and the condition
of the home. If the buyer's mortgage is insured through the FHA, the
appraiser must disclose potential problems relating to the physical
condition of the home; there are no similar stipulations for non-FHA
To determine an accurate measure of what your home is worth, REALTORS® can
supply a comparative market analysis (CMA), which provides information on
recent selling prices of similar properties in the same market. With a CMA,
you can monitor the closing price of specific house types in certain areas
(e.g., a condominium in a metropolitan area). Again, consult your REALTOR®
if you're interested in learning more about a CMA.
Setting The Price
In establishing the listing price for your home, you need to strike a
delicate balance between a figure that will scare off potential buyers and
a low price that doesn't represent your home's worth. Buyers will compare
your home's price with other properties on the market. Therefore, you
should use a CMA to assess what consumers are paying for similar homes.
CMAs also include information about area homes that failed to sell in
recent months along with their corresponding list prices. Your REALTOR® can
assist you in obtaining and analyzing that information.
The NATIONAL ASSOCIATION OF REALTORS® suggests some additional steps to
help you set your list price. After analyzing sales data, conduct some
market research on your own. Attend an open house or two and make an
impartial assessment of how those homes compare to yours in terms of size,
location, amenities and condition.
Your REALTOR® can be a vital resource in analyzing all the pertinent
information with you to develop a list price. Trust your REALTOR®'s
judgment, as he or she offers experience in this arena. However, the final
decision on the listing price for your home is your choice to make.