Should you get an appraisal before you list?
We recently bought a three bedroom, two bath ranch style home with a full basement over in Calhoun.
It’s in a good neighborhood and was in decent condition. The seller was an accidental landlord. This was his primary house for many years. But he had had a life change and had moved to another area.
He was then approached by a friend who asked if he could rent the place. My seller agreed and made the rent rate equal to his own monthly mortgage payment on the house. But in return, my seller asked that the friend do maintenance on the house. The friend agreed.
You can probably guess what happened. The friend moved out suddenly, didn’t pay rent for a few months, and because my seller was renting to his friend, he had left utilities on in his name. That bill didn’t get paid either. In addition, no maintenance had been done on the house in the past five years as far as I could tell.
There were pine saplings with a girth the size of a nickel growing from the gutter. And because the gutters were so stopped up with trees and other things, water was not being diverted and had been seeping under the back door. This caused some rot in the subfloor and floor joists.
On top of that, the friend had left a house full of stuff. It was like he just picked up and moved and didn’t take anything with him. The fridge was still stocked full of steaks, ice cream and even beer. So, you can tell he left in a hurry.
Well, my seller was hurt and just wanted to be done. We countered back and forth on a price, and finally came to terms on something that worked for both of us. We closed it shortly thereafter.
Before we did, though, I called my agent to give me an idea of what she thought the house would sell for all fixed up. This is the number I based my purchase offer on. She told me that she thought the ARV (after repair value) would be $190,000.
After we closed it, I called my insurance man to get it insured. He looked at the tax card and pointed out something. In the building diagram, it said the basement was longer than the house, which is not common. Normally the first floor and basement are equal or the first-floor sticks out further than the basement. This was important because we had based our ARV on the square footage on the tax card.
Thinking I’d better get this checked out, and wanting to be official, I called my good friend and awesome appraiser Phillip Henson. He got to work on it, measured the house, and sure enough, we had an additional 350 square foot. That meant the house was more valuable than we thought.
We paid for an official appraisal, and the end value came in at $254,000. So, by spending a few hundred dollars on getting an official appraisal, we just earned an additional $64,000.
That is awesome.
Now, you may be asking why my agent was so far off. First off, she conducted her assessment based on the smaller square footage. Next, she did it in November. It’s now March. Things have continued to grow in value since she made her prediction. This is one of the reasons why we don’t advertise a sales price until right before we list.
It’s important to note that at the time my agent made her assessment, her value was correct with the square footage that was on the tax card. As matter of fact, the price per square foot changed only two dollars between to the two values.
But agents do not typically go out and measure properties. Appraisers, however, do. And because we used the right real estate professional, with the right set of tools, we discovered more square footage and a way better value.
So, does it make sense to get an appraisal before you list? I’ll be honest: We have not typically done this in the past.
But as crazy as this market is, and with how much things are appreciating, it may make a lot of sense to start getting an appraisal before you list. At least, it did for us.