Why would a homeowner want to pay for an appraisal on their home? For the average property owner, appraisals are only done when property is being purchased or refinanced, and even then only at the behest of the buyer or owners lending institution. Real estate appraisals are an essential valuation tool used by lenders to reduce lending risk. Conducted by trained, state licensed appraisers, they provide an accurate value of a property on the day that the appraisal is done. Unfortunately, as time goes by after the appraisal is conducted it becomes less and less reliable as an accurate valuation of the subject property. The appraisal is only a snapshot of value on the day the appraisal is done.
After the appraisal is complete, natural, social and economic events slowly and continuously alter the value of the property. Just as the value of major stock exchange indexes fluctuate daily, property values are also affected by external conditions day to day.
In order to have an accurate valuation of a property, an appraisal should be performed annually. If an owner is attempting to sell a property in a particularly slow or volatile real estate market, it would be wise to have an appraisal performed every 3 to 6 months.
When selling a piece of real estate, appraisals can be absolutely invaluable when determining the list price. Buyers are more willing to pay full price for a property when they have recently determined (proven) values. Sellers can also benefit from recent appraisals by listing their home or property at a price below the appraised value. This ensures instant equity to a buyer, providing a very strong incentive for a buyer or investor to make the purchase. It’s frankly amazing that more sellers aren’t willing to pay $350 for an appraisal before listing when it could justify thousands of dollars more in the sale of their property
Multiple appraisals can also be used in the acquisition of commercial real estate as a method of ensuring value accuracy. This helps remove risk from commercial lenders by giving them reason to believe that their initial investment as well as their return will be safeguarded. Although many people think multiple appraisal is overkill, it may be a useful tool for some in acquiring commercial financing for those multimillion dollar deals.
As a Realtor, I rarely see sellers use the appraisal to their advantage when chasing their desired price point. Typically, seasoned real estate investors are more willing and adept at leveraging the power of the appraisal as a tool for harvesting their profits.