What’s your home worth?
It seems like a simple question, but finding that answer is more complicated than it might seem. Sites like Zillow, Redfin, Eppraisal, and others have built-in home valuation tools that make it seem easy, but how accurate are they? And which one do you believe if you get three different answers? Online valuation tools have become a key part of the home buying and selling process, but they’ve been proven to be highly unreliable in certain instances. One thing that is for certain is that these valuation tools have reinforced that real estate agents are as vital to the process of pricing a home as they ever were – and maybe even more so now.
There are limitations to every online valuation tool. Most are readily acknowledged by their providers, such as Zillow’s “Zestimate”, which clearly states that it offers a median error rate of 4.5%, with varying accuracy across the country. That may not sound like a lot, but keep in mind that amounts to a difference of about $31,500 for a $700,000 home. For Redfin and Trulia, there are similar ranges in results. When you dig deeper into these valuation tools, it’s no small wonder that there are discrepancies, as they rely on a range of different sources for information, some more reliable than others.
Redfin’s tool pulls information directly from multiple listing services(MLSs) all over the country. Others negotiate limited data sharing deals with those same services, but also rely on public records, as well as homeowners’ records. This can lead to gaps in coverage. These tools can serve as helpful pieces of the puzzle when buying or selling a home, but the acknowledged error rate is a reminder of the dangers of relying too heavily on them.
Home valuation tools can be a useful starting point in the real estate process, but nothing compares to the level of detail and knowledge a professional real estate agent offers when pricing a home. An algorithm can’t possibly know about a home’s unique characteristics or those of the surrounding neighborhood. They also can’t answer your questions about what improvements you can make to get top dollar or how buyer behaviors are shaping the market. All of this – and more – can only be delivered by a trusted professional whose number one priority is getting you the best price in a time frame that meets your needs.
If you’re curious what your home might be worth, Windermere offers a tool that provides a series of evaluations about your property and the surrounding market. And once you’re ready, we’re happy to connect you with a Windermere agent who can clarify this information and perform a Comparative Market Analysis to get an even more accurate estimate of what your home could sell for in today’s market.
Appraisals are designed to protect buyers, sellers, and lending institutions. They provide a reliable, independent valuation of a tract of land and the structure on it, whether it’s a house or a skyscraper. Below, you will find information about the appraisal process, what goes into them, their benefits and some tips on how to help make an appraisal go smoothly and efficiently.
Appraised value vs. market value
The appraised value of a property is what the bank thinks it’s worth, and that amount is determined by a professional, third-party appraiser. The appraiser’s valuation is based on a combination of comparative market sales and inspection of the property.
Market value, on the other hand, is what a buyer is willing to pay for a home or what homes of comparable value are selling for. A home’s appraised value and its market value are typically not the same. In fact, sometimes the appraised value is very different. An appraisal provides you with an invaluable reality check.
If you are in the process of setting the price of your home, you can gain some peace-of-mind by consulting an independent appraiser. Show him comparative values for your neighborhood, relevant documents, and give him a tour of your home, just as you would show it to a prospective buyer.
What information goes into an appraisal?
Professional appraisers consult a range of information sources, including multiple listing services, county tax assessor records, county courthouse records, and appraisal data records, in addition to talking to local real estate professionals.
They also conduct an inspection. Typically an appraiser’s inspection focuses on:
- The condition of the property and home, inside and out
- The home’s layout and features
- Home updates
- Overall quality of construction
- Estimate of the home’s square footage (the gross living area “GLA”; garages and unfinished basements are estimated separately)
- Permanent fixtures (for example, in-ground pools, as opposed to above-ground pools)
After considering all such information, the appraiser arrives at three different dollar amounts – one for the value of the land, one for the value of the structure, and one for their combined value. In many cases, the land will be worth more than the structure.
One thing to bear in mind is that an appraisal is not a substitute for a home inspection. An appraiser does a cursory assessment of a house and property. For a more detailed inspection, consult with a home inspector and/or a specialist in the area of concern.
Who pays and how long does it take?
The buyer usually pays for the appraisal unless they have negotiated otherwise. Depending on the lender, the appraisal may be paid in advance or incorporated into the application fee; some are due on delivery and some are billed at closing. Typical costs range from $275-$600, but this can vary from region to region.
An inspection usually takes anywhere from 15 minutes to several hours, depending on the size and complexity of your property. In addition, the appraiser spends time pulling up county records for the values of the houses around you. A full report comes to your loan officer, a real estate agent or lender within about a week.
If you are the seller, you won’t get a copy of an appraisal ordered by a buyer. Under the Equal Credit Opportunity Act, however, the buyer has the right to get a copy of the appraisal, but they must request it. Typically the requested appraisal is provided at closing.
What if the appraisal is too low?
If your appraisal comes in too low it can be a problem. Usually, the seller’s and the buyer’s real estate agents respond by looking for recent and pending sales of comparable homes. Sometimes this can influence the appraisal. If the final appraisal is well below what you have agreed to pay, you can renegotiate the contract or cancel it.
Where do you find a qualified appraiser?
Your bank or lending institution will find and hire an appraiser; Federal regulatory guidelines do not allow borrowers to order and provide an appraisal to a bank for lending purposes. If you want an appraisal for your own personal reasons and not to secure a mortgage or buy a homeowner’s insurance policy, you can do the hiring yourself. You can contact your lending institution and they can recommend qualified appraisers and you can choose one yourself or you can call your local Windermere Real Estate agent and they can make a recommendation for you. Once you have the name of some appraisers you can verify their status on the Federal Appraisal Subcommittee website.
Tips for hassle-free appraisals:
- What can you do to make the appraisal process as smooth and efficient as possible? Make sure you provide your appraiser with the information he or she needs to get the job done. Get out your important documents and start checking off a list that includes the following:
- A brief explanation of why you’re getting an appraisal
- The date you’d like your appraisal to be completed
- A copy of your deed, survey, purchase agreement, or other papers that pertain to the property
- If you have a mortgage, your lender, the year you got your mortgage, the amount, the type of mortgage (FHA, VA, etc.), your interest rate, and any additional financing you have
- A copy of your current real estate tax bill, statement of special assessments, balance owing and on what (for example, sewer, water)
- Tell your appraiser if your property is listed for sale and if so, your asking price and listing agency
- Any personal property that is included
- If you’re selling an income-producing property, a breakdown of income and expenses for the last year or two and a copy of leases
- A copy of the original house plans and specifications
- A list of recent improvements and their costs
- Any other information you feel may be relevant
By doing your homework, compiling the information your appraiser needs, and providing it at the beginning of the process, you can minimize unnecessary phone calls and delays and get the information you need quickly and satisfactorily!
Here are a few Local Appraisers from Stanwood & Camano Island:
W.E. Kintner & Assoc. (360) 629-4216
PC Appraisal Company (360) 387-2043
Peterson Appraisal & Consulting (360) 629-0445
Hamilton Appraisal Services, Inc. (425) 422-3348
Our brokers are deeply connected to the issues that face local home-buyers and sellers. In this series of blogs, “The Broker’s Perspective” Windermere Stanwood and Camano Island brokers provide insight into current market trends and topics. This week, we discuss the King 5 feature on increased housing inventory with broker, Jill Vail.
King County home buyers saw relief in July, but it’s not the same story across the region. King County’s real estate market continued to see a cooling effect in July with year-over-year inventory up and sales down, the Northwest Multiple Listing Service reported Monday.
Housing inventory – or how long it would take to sell all houses on the market without more being listed – improved 6.5 percent since last July, according to the Northwest MLS. At the same time, pending sales and closed sales are down 7 percent and 3.4 percent, respectively.
“It has been a long time coming, but we finally have some solidly good news for buyers in the Puget Sound area,” OB Jacobi, president of Windermere Real Estate, said in a statement.
In July, Seattle and King County saw the highest housing supply levels since 2015, according to Robert Wasser, owner of Prospera Real Estate.
Industry leaders said the increased inventory has had a calming effect on prices as sellers have had to let go of expectations of multiple offers or massive price escalations.
However, it isn’t the same story across the state. Of all counties in Western Washington, King County saw the largest gains in inventory year-over-year. Snohomish County inventory improved slightly, but Pierce County saw a decrease in inventory coupled with more pending sales and increased prices. “Pierce County has, for a handful of years, been the affordability solution for buyers who would otherwise buy in King County,” Northwest MLS director Mike Larson said. “I think the craziness of the King County market has magnified that fact even more.”
Industry leaders cautioned that while the market has cooled, it is by no means cold. King County still only has 1.57 months of inventory, which is below a healthy inventory of four or five months, according to President and COO of Coldwell Banker Bain Mike Grady. “We are still a seller’s market,” Broker Keith Bruce said. “Much more inventory is needed to meet the overall demand for quality homes in Seattle.”
I often have clients asking if we are seeing the same craziness in our real estate market as they are in King County. The good news is that our market was never as frenzied as it was for our urban neighbors. We had multiple offers and escalated prices but never to the tune that they did in Seattle. Our market still needs some corrections, but we are not seeing the significant increase in inventory that Seattle is seeing. No market can sustain the kind of price increases they saw in Seattle, so some adjustments were due.
Even though reports indicate that housing inventory has increased in King County, Camano Island inventory has actually decreased since the same time last year. Listings are down almost 20%, from 124 to 100 residential listings. Inventory in Stanwood is a little different, though. It has increased by 10%, from 94 to 103 homes at this same time last year. Stanwood’s market is affected by the new construction communities that have been popping up. Some new homes have come on the market over the past year, making up for a lack of new construction over the last 10 years, which is great for buyers.
While the market is slowly correcting itself, make no mistake—it is still a seller’s market. The average days on market has decreased sharply. A year ago, the average days on market for sold homes was 60. Currently, we are down to only 43 days. There are still some strong upward pressures on prices, too. A year ago, Camano Island’s months of inventory was at 2.4. Currently, we are seeing only 2/3 of that, at 1.6 months. Stanwood is up to 1.5 months from 1.2 this time last year. A balanced market should be 3-6 months and we have a way to go before we get to that level.
So, it’s still a great time to sell in Stanwood and Camano Island. I have buyers out there waiting for the right home to come on the market for them. We are starting to see an improvement in conditions for buyers, but they still need to act fast when they see that great house come on the market. Some buyers are still learning that the hard way. It is important for buyers to keep an eye on the market and hire a professional who can help them act quickly and be competitive.
Jill Vail | Windermere Stanwood and Camano Island Broker