Do You Need an Appraisal Before You Sell Your Home?
Published On: April 16, 2025 Posted by: Jeremy Peterson
Nobody wants to leave money on the table when selling their property. Whether its their home, income property, recreation property, or vacant land, sellers understand that it is important to know what their property is worth as they prepare to put it on the market. But, what is the right way to do that?
Many of my clients have ask if they should get an appraisal before they list their property. Let’s talk about appraisals for a moment so we understand their role and some of the quirks involved.
Appraisals typically fall into three categories:
- PURCHASE APPRAISALS are those ordered by lenders when a sale is on going. Appraisers are selected by a lottery system through an Appraisal Management Company. In these transactions, an appraiser is heavily influenced by the purchase contract. His assertion is that a willing buyer and a willing seller came up with a price together and that is the best opinion of market value in real time. His job is then to ratify the value while making sure that the price isn’t wildly off base. Typically appraisers have a + or – 5% tolerance in their assessments. If the purchase price is 5% above what their market analysis indicates, they may justify the price. If it goes above that, they may not. Or, if a large down payment is involved, there is room to support a higher number. Since the bank is taking on the new risk of a new loan, a “bad” appraisal means an appraiser’s license could be on the line if the buyer defaults. In my experience, since 2008, appraisers have tended to be more conservative with purchase appraisals unless buyers are bringing large down payments to the transaction.
- REFINANCE APPRAISALS are ordered when homeowners want to refinance existing financing. The same rules apply. However, the bank risk is not “new” since to the property already has financing in place and the home is not being sold. Also, since the loan is an asset to the bank, the larger the loan, the better for the bank. Thus, in my experience, refinance appraisals have tended to be more liberal than purchase appraisals.
- INDEPENDENT APPRAISALS are ordered for various reasons like divorce, estate changes, curiosity, etc. In these instances, appraisers are working for the person ordering the appraisal and not a banking institution. Typically there is not a threat of licensing problems to an appraiser in these circumstances. So, an appraiser has more latitude to express his opinion either way on a property. In my experience, appraisers want to keep their customer happy, which typically means a value that leans higher.
NOTE: With this all being said, and before I get called out by my appraiser friends, let me say that they are all highly trained and follow very rigid protocols and procedures in providing value estimates. But, an opinion of value is just that, an opinion and opinions can vary for various reasons.
So, lets get to the question of whether an appraisal is needed to sell a property. The short answer to this is, no. While useful, an appraisal costs hundreds of dollars and is not necessary to prepare a home for sale. Real Estate Agents have access to the same recent comparable sales information which appraisers do that allows them to perform a market analysis on your property. Most agents, like myself, perform this service for free for their clients. The fancy parlance for this is called a Broker Price Opinion.
Keep in mind that market conditions fluctuate seasonally and with economic events. So, the exact price that a buyer is willing to pay for your home may fluctuate as well. But, the good news is that most market analysis, especially from very experienced agents like myself, provide a solid barometer of what you could expect to get for your property.
If you are in the market to sell your home, or you want to find out what it is worth, give me a call at 801-390-1480.
