An appraisal plays a vital role in a real estate transaction. It is a critical factor in the equation that influences the asking price of Hillsborough County homes, which ultimately ends up affecting the final selling price. As a seller, you have a vested interest in an accurate valuation for your property. With a precise valuation, you can negotiate a sales price that nets the most out of the transaction. If you are looking to place your home on the market, take a look at the below information to learn why the appraisal is so important and what it means for your bottom line.
What is An Appraisal?
Appraisals play a vital role in a real estate transaction. As a seller, you might hire an appraiser to determine the value of your property before you place it on the market. Your agent will use the appraisal to help come up with an asking price. Lenders require appraisals before extending credit to a buyer as they don’t want to lend more money than the property is worth.
Appraisals represent an educated guess by a professional appraiser as to the value of a property. The appraiser evaluates several factors to make a decision. The perform an exhaustive inspection of the property. They’ll consider square footage, number of bedrooms, number of bathrooms, the presence of a basement, etc. For most home appraisals, Hillsborough County appraisers also compare the home to recent sales of similar properties in the neighborhood. Known as “comparables,” these sales figures give an appraiser a general idea of what the house may be worth in comparison to other properties. There may be instances however when comparables don’t offer an accurate comparison. Most appraisers only look at sales within the past six months. If there were no Hillsborough County homes for sale within that period, the appraiser might have to consider homes sold beyond the six month period. Using old sales data could lead to a lower valuation, as the market may have been down and only reflects low sales prices. Another situation that could cause a valuation to be inaccurate is if there are no homes in the neighborhood similar to the house in question. Often this is the case with custom homes surrounded by a neighborhood of builder grade homes. Once the appraiser gathers their data, they use mathematical formulas to come up with their best estimate of the property’s value.
The Difference Between Appraised Value, Assessed Value and Market Value
If your home is on the market, chances are you’ve heard the term assessed value mentioned alongside appraised value. Many people incorrectly use the terms interchangeably when in fact they represent two very different numbers. Understanding the difference will help you determine a fair asking price for your home. The assessed value of a home determines the property taxes. Assessors working for local governments determine the assessed value of Hillsborough County homes to calculate property taxes. The appraised value of a home represents a third party appraiser opinion as to the value of the property. The two numbers are often very different. For example, the county could establish an assessed value of $150,000 for tax purposes while an appraiser may set a valuation of $200,000. With that being said, neither of these numbers represents fair market value. The market value of a property represents what buyers in the market are likely willing to pay based on recent sales data of other homes in the area. Although the three numbers are entirely different, they all play a role in determining an asking price for the house. Ideally, the asking price should represent an approximation based on the appraised value assessed value, and market value.
How Appraisals Affect Selling Price
With all that being said, how then does appraised value affect selling price? Many factors influence the final sales price on Hillsborough County homes for sale. An appraisal only represents one element in the equation. When determining how much to lend a borrower, a lender uses the appraisal to set the maximum loan amount. A low valuation would lead a buyer to offer less for the property which would drive the sale price lower than the asking price. Conversely, if you received an assessment that was higher than your asking price, you would increase the asking price to reflect the home’s actual value. In that case, you’d likely end up with a sales price higher than your asking price. So in effect, the appraisal impacts how much buyers are willing to pay for the property.
So as a seller, what do you do when the appraisal comes back lower than your asking price? As a seller, it is important to remember that due to contract contingencies, a buyer purchasing Hillsborough County homes can cancel the contract if the appraisal comes lower than the asking price. As a result, you will likely, need to lower the price to align with the appraised value. Another option is to compromise with the buyer. If the appraiser determines a value of $210,000 but your asking price is $220,000, you might consider negotiating with the buyer for a selling price of $215,000. Such an arrangement isn’t ideal for the buyer. In this scenario, they would need to come up with an extra $5,000 to purchase the property, because the bank will only lend them $210,000. There are instances, however, where you might convince a buyer to pay the extra $5,000. If the home was in a hot real estate market with low inventory, the buyer might be willing to pay a premium to buy the house.
In the end, for best results and to, to receive the optimal selling price for your home, it is best to determine an appropriate asking price. And you can only do so by evaluating several factors, which includes the appraised value.
As a seller, your appraisal has some influence on your asking price which ultimately impacts the final selling price for your home. Although they are highly subjective and based mostly on opinion, they are invaluable for a successful sale. With an accurate valuation, buyers are likely to offer a price that reflects the actual value of the house.