Home sellers are making more money by pricing their homes based on the advice of professional appraisers
Long Island, NY (PRWEB) November 17, 2011
NY real estate appraisal experts Appraisal Source reveal a new trend in the real estate market. Previously only used by buyers, now home sellers are paying for their own independent real estate appraisals prior to putting their homes up for sale.
Homeowners have traditionally relied on real estate agents to guide them in the pricing of their home, while real estate appraisers are usually associated with the home buyer and their mortgage lender.
However, in these uncertain times – when every dollar counts – more homeowners are opting for the opinion of an independent professional real estate appraiser to help guide their critical pricing decisions, reports New York appraiser Appraisal Source.
Why is a correct home valuation so critical?
Most real estate professionals would say that pricing a home too high can be as damaging as pricing it too low. Sitting on the market for too long can make a property less appealing to potential buyers.
Choosing the right price can be a very difficult decision. The key is to find a balance between optimizing revenue while also still being competitive with the other homes for sale in the market.
It all starts with one important question: "What is my home actually worth?"
To sell a home in a reasonable period of time – and get as much money for it as possible – sellers need the most accurate possible answer to that question.
So, who should a seller trust to answer that question - a real estate salesperson or a real estate appraiser?
Traditionally, homeowners have turned to their real estate agent. But that is changing, as they realize that agents are not only less qualified to value a home, but it is also in their interests to sell the home for less than it is worth.
In most states in the U.S., a person with absolutely no real estate experience can become a fully licensed real estate salesperson in a matter of weeks, while it typically takes a minimum of 2 - 3 years for someone to become a fully licensed real estate appraiser.
Critically, while the average real estate agent sells less than 10 homes per year, an average real estate appraiser will typically value 200 - 300 individual homes over the same period.
The bottom line is that the average real estate appraiser is likely to have far better training and far more experience in property valuation than the typical real estate agent.
Are my agent's interests aligned with mine?
It is easy to assume a real estate agent will naturally put the seller's best interests first. A real estate agent works on commission, so they only get paid if their client's home is sold. And the more it sells for the more commission they get. So surely the agent will push for the highest sale price.
Because of the commission structure in and between most real estate offices, even though you might agree to pay your agent a 5% commission for selling your home, in reality, they will often end up receiving as little as 1%.
Say a real estate agent prices and sells a house at $500,000.
With a typical commission agreement of 5%, the commission paid to the real estate agent is $25,000. But the listing agent's office usually only gets half of that - so, $12,500 goes to the listing agent's office and the other $12,500 goes to the office of the agent that brought the buyer to the house.
Further, the listing agent usually only gets about half of the money that was paid to his or her office (the rest goes to their broker). That leaves the agent with only around $6,250 - or 1.25% of the actual selling price.
What if the agent priced the same home for $520,000... $20,000 more than in the first scenario? The agent will only make about an extra $250 for earning the seller an extra $20,000.
In his paper “How Much Value Do Real Estate Brokers Add? A Case Study” Stanford economist B. Douglas Bernheim finds that...
“Because the relationship between the homeowner and the broker resembles a classical principal-agent problem, the broker may not deploy services in ways that promote the seller’s interests.” (http://www.nber.org/papers/w13796)
"The truth is, there is little incentive for the real estate agent to fight to sell a home for its true market value. It is easier and safer for your agent to price a home beneath its market value, in order to make sure it gets sold – and they get paid," says appraiser Kevin Donegan. "That's why we are getting more requests for home appraisals from homeowners than ever before."
Source: Appraisal Source, Appraisal Source