How Is a Broker Opinion of Value Different Than an Appraisal?

Local brokers sometimes assist licensed appraisers with local data on homes.

Local brokers sometimes assist licensed appraisers with local data on homes.

Getting an estimate on the market value of your home can be a nerve-wracking experience if you want to sell. While significant differences exist between a real estate broker's opinion and a licensed appraisal, each affects your ability to get top dollar for your house. Keeping a well-maintained, organized and clean home can improve your estimate on either type of appraisal.

Appraiser

A broker's opinion of your home's value is typically prepared by your real estate agent when you sign a listing agreement. A formal, licensed appraisal is performed by a professional certified within your state to offer an estimate of market value on homes. Each receives education and training to provide you with an accurate depiction of your home's worth. However, the real estate agent usually uses a simpler process of comparing your home to other comparable ones in the area. Selling homes is her primary duty. A certified appraiser estimates home values for a living and uses more thorough types of analysis and market comparisons.

Timing

A real estate agent estimates your home's value before it is listed for sale. The estimate is used to prepare an offer price that is not overpriced, but gets you fair value. While you can pay for a professional appraisal anytime, your buyer's lender typically arranges one prior to final approval of a loan. This happens after you have agreed to a purchase contract and before the buyer closes on the purchase.

Purpose

The broker's opinion is mainly for your benefit as a seller. Your agent wants to help you set the most reasonable listing price possible. If you go too high, you turn away potential buyers. If you too low, you may not get the full value you deserve. A licensed appraisal arranged by the buyer's lender is intended to protect the interests of the buyer and lender. Most purchase contracts allow the buyer to get out of the deal if his lender won't approve financing. Lenders usually won't approve if the professional appraisal is below the purchase price. In this case, as the seller, you can accept the lower appraised value in a new deal or wait for another offer.

Process

The formal appraisal process is usually much more involved than a broker's opinion. Your real estate agent just does a comparison of your home to similar homes in the market to get a basic idea of value. If your home has additional features, it may show a slightly higher value to comparable homes. Any missing features would cause a lower estimate. While the licensed appraiser also compares your home to others, he usually explores the value in more detail. The multiple listing service, local tax and court records, information obtained from you as the seller and other published appraisal data on your home and others are all used at times. The appraiser puts together a detailed report that shows all elements of the appraisal and a summary of value. This is much more intricate that the normal broker estimate paperwork.

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