Market Update from Broker Keith Gordon - Selling for more than appraised value
Sellers Can Sell For More Than Appraised Value
Sellers seem to always bring up Zillow’s Zestimate and how it’s either low or high, but sellers almost never bring up the elephant in the room which is the appraisal. The real issue that hurts sellers is a short-appraisal, which is defined as the difference between a sales price (contract) and the appraised value.
Three factors cause a short appraisal. One: a home that is nicer than the surrounding homes because of new roof, a/c, upgraded kitchens and flooring, better lot/view, etc. Two: going into contract high (full-value,) ignoring any appraisal conversation. Three: the passage of the new mortgage protection act called Dodd-Frank. Appraisers are often from out-of-area (saves lenders money) and are not familiar with local real estate and thus assign opinions of value to homes far below the highest value, focus on median values, and ignore all the upgrades.
Some homes are just crazy nice and will never appraise, assuming the home sells for or close to its “highest value.”
There are ways to overcome an appraisal shortfall. You can hire an agent that understands more than just negotiating a deal based on what everyone believes the appraisal will be, as if one should sell for the appraised value. In my opinion, a seller can, and should, sell for the highest value all of the time. Realistically, if a buyer wants all your nice improvements they can buy it from you and pay the appraisal shortfall themselves and close. Or, they can buy a sub-par home, spend their money at Home Depot and improve the home themselves. If the buyer likes your nice improvements they have to be willing to pay for it and agree to close the deal with an appraisal shortfall before signing the sales contract.
An agent or buyer will sometimes make an offer above the expected appraisal, knowing the seller’s property will never appraise. The strategy is to wait for the appraisal and then leverage the seller because they feel they have the seller over-a-barrel after the appraisal comes in lower than the contract price. The listing agent should be prepared for this and know how to handle it ahead of time.
Determining which agent to hire should not be based on who sells the most homes but which agent is the best negotiator and can manage an appraisal shortfall the best. I am the FL broker for GetMoreOffers.com via my brokerages, ADDvantage Real Estate Services and Altru Realty. I have built a reputation for being a strong negotiator, getting the asking price and even higher when I can. I am a patient negotiator which is why I tend to drive up prices. I have great experience with appraisal shortfalls. I believe in full-price more than a counter. I believe the market is the best indicator of price, not listing agents. I prefer not to leave money on the table and I don’t believe in paying for buyer’s home warranties or buyers closing costs