Setting the right price is an important first step in getting a home sold. Sellers often wonder if they should spend $200 to $400 for a professional appraisal of their property before placing it on the market.

WAYS TO DETERMINE VALUE

A professional appraiser's opinion of a property's market value is based on the recent sales of similar homes. Different appraisers could come up with different numbers. Even if all of them agreed on a value, there is no guarantee that you would receive that amount for your property. An alternative to a professional appraisal is to ask a professional Realtor for a written market analysis of your property. This analysis will include information about recent home sales in your neighborhood, as well as how those homes compare to yours. Realtors may provide this service with no charge or obligation. If you are still unsure of the value of your home, you may wish to pay for an appraisal.

THE RULE OF THREE

When you buy a house or refinance your present home, your lender will ask you to pay for an appraisal to help ensure that the sales price and mortgage amount is consistent with the property's market value. The appraiser uses the Rule of Three.  What that means is the lender wants to evaluate three "comparables"—recent sales of nearby homes that are very similar to the one you are buying.  Based on this information, the lender will make adjustments to reflect the differences between the properties and arrive at a fair price for your home.

HOUSING PATTERNS

Housing patterns tend to be homogenous, meaning homes worth $100,00 are located in $100,000 neighborhoods. It is important for properties to be within the general pricing patterns of their neighborhoods because over-valued homes, even if they are exceptional, are sometimes difficult to sell at full market price. Remember, lenders want to compare your home to nearby homes.  If your home is located in a neighborhood of $100,000 homes but you have added another $100,000 in improvements, you may have over- improved your property in that lenders will be reluctant to lend the higher amount.

Joan Goloskov