Selling your home below its appraised value may deprive you of money that you could have otherwise received from the sale, but it can also help you speed up the process of selling your home if you are under a time crunch. Carefully consider the pros and cons before deciding to take this step.
An appraisal is an objective assessment of the value of a home. It is based on the fair market value of the property, the price that a willing buyer would pay to a willing seller for the property. A professional appraiser will evaluate many details of a property to determine its value, including its location, need for repairs, architectural features, layout and the current real estate market. This process is different than using a competitive market analysis, which is a comparison of similar homes in the neighborhood and the price for which they sold.
Having a good understanding of your local market can help you determine the price at which to list your house. If there is a large inventory of homes at your price point, pricing under the appraised value of your home can provide you with a competitive edge. However, if it is a seller's market, in which homes are quickly selling at or above their appraised value, it may be better to use a sell price that is close to the appraised value. Evaluating the sell prices for properties near yours can help you develop a better understanding of the asking price for your area and price point.
The motivation that you have for selling your property can also help influence the price at which you list it. If you want to sell your home more quickly, you may consider listing it below its appraised value. If a property is priced too high, it can stay on the market longer. Additionally, if a home is priced too high, you will have fewer showings and prospective buyers may question what is wrong with the home if it has sat on the market for too long, causing your home to decrease in value to prospective buyers. Some sellers place their house on the market below its appraised value to get multiple offers on the property and to drive up the price. You may consider listing the home below its appraised value if you are attempting to get more traffic to a property that is in a less desirable area.
Many lenders will not finance a mortgage if the property is appraised at a value that is lower than the asking price. Listing your home below the appraised value can open financing for more buyers.
- Realtor.com: Five Tips for Getting Your Home Appraised Before You Sell
- National Mortgage Alliance: What Is an Appraisal?
- ByOwnerSantaFe.com: Selling: Price Your Home Properly
- Bankrate.com: 7 Tips for Selling Your Home to Family
- California Department of Real Estate: Appraisal and Valuation
- Inman News: Pros and Cons of Pricing Home Under Market
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