appraiser versus realtor

[Mark Rainey]

Thinking of selling a second home in Lancaster PA area. Renting to a family for many years, and they may be interested in buying. To find a reasonable price do I hire an appraiser or get a realtor. Thoughts?

[Jim Becker]

Mark, I suggest you use an appraiser for this. Engaging a realtor, even peripherally with a "I'm considering selling....what do you think it's worth on the market?", can legally get you into a position of paying a realtor's fee if you sell within a certain period of time, even to a relative. With an appraiser, you don't have that situation. Just be clear with them than you're looking for market value, not the more conservative numbers that often come for a financing appraisal.

But before you do that....look at the local market using the readily available tools like Zillow, Realtor, Redfin, etc. (all dot com), and see what similar properties are listed for as well as what Zillow's ZEstimate is, if displayed for your property. That will give you a good idea about what things look like currently.

[Stephen Tashiro]

Thinking of selling a second home in Lancaster PA area. Renting to family for many years, and they may be interested in buying. To find a reasonable price do I hire an appraiser or get a realtor. Thoughts?

If the purchaser takes out a loan (especially an FHA guaranteed loan) then appraisers and inspectors will be involved -and they won't be selected by you.

When hired by a bank, the appraiser's valuation sets the maximum price that a bank will loan for purchasing a property. When hired by you, an appraiser can give you a forecast of what the bank's appraiser will say, but (in my state) it won't be your own appraiser that sets what the bank will loan. And a buyer may not want to offer the maximum possible amount that can be borrowed!

[ChrisA Edwards]

I would suggest, as Jim stated, using some of the online resources/tools available such as Zillow.

A realtor will give you a more realistic market value, but as Jim also stated, you might be locking yourself in.

Appraisers are usually working for a bank/lender, so there approach is slightly different.

I've had two properties appraised, for sale value, by two or more appraisers for setting a corporate buy out price. The first one was appraised by three appraisers because the first two appraisal values were more than 15% apart, so a third appraiser was used and the value was determined from the average of the three appraisals. If I remember correctly the first appraiser was $212K, the second was $283K and the third was $233.

Another house, we put the house on the market and had an offer the next day. The appraiser, for the corporate buyout price, came a few days later and I showed him the contract and he just set the buyout price to that offer price.

Our current home was appraised $80K less than our purchase price offer, that worked out for us as the sellers pretty much had to lower the price, but based upon other sales on the street, the appraiser was way low and known for being that way.

So it's a bit of a double edged sword.

[glenn bradley]

Home appraisal is very subjective. I had to pay for a second appraisal on one home when the first appraiser (quite obviously) was having some sort of a bad day. She came in $80k under the guesstimate, second appraisal was nearly $10k over. Be that as it may, an appraisal is your best route to an emotionally disconnected discussion with your long time renters. It will also tell them what they should expect to pay. A key takeaway about appraisals might be "An appraisal is an unbiased professional opinion of the value of a home and is used whenever a mortgage is involved in the buying, refinancing, or selling of that property". You are free to price the home above or below but, the appraisal gives your buyer an idea of what the bank will lend them.

[Mark Rainey]

Thanks you everyone for the good information.

[Weogo Reed]

Hi Mark,

Appraisal certifications vary by state.
Some require specific college level courses and/or a degree and
a certain number of years working under a licensed appraiser.
Other states have pretty simple certification requirements.
So the quality of an appraisal can vary significantly by what state you are in.
There is science behind a good appraisal, but often the best number is a range.

When you hire an appraiser as a buyer, there is an unspoken request for
a lower value and the opposite for when you are a seller.
Appraisers want positive referrals to stay in business, are human, and may do a bit of people pleasing.

My brother was an appraiser for almost 40 years.
He hated the people pleasing aspect and ended up doing mostly commercial and government work.

In my opinion an appraiser will generally give you more accurate information than a realtor.

One way to get the most accurate appraisal is for the buyer and seller to split the cost.

Thanks and good health, Weogo

[Stan Calow]

In our area, it is often recommended, that if you already have a buyer lined up, you can negotiate with a realtor to handle all the considerable details (escrow, title search, paperwork, and appraisal, etc.) at a reduced fee.

[Art Mann]

Many years ago, we counted on the opinion of a realtor to help us set the price of a lake house we were selling. That was a profound mistake. We sold the house for around $40,000 less than it was worth. Shame on us for not doing our homework before the sale! Just remember that a realtor is absolutely not a disinterested and unbiased third party. On the other hand, houses in our neighborhood routinely sell for $20K to $50K above the asking price due to market conditions and buyers bidding up the price. Houses are in extremely short supply. My point is that I agree very much with Jim Becker. Do your own research before you trust either a real estate agent or an appraiser.

[Jim Becker]

If the purchaser takes out a loan (especially an FHA guaranteed loan) then appraisers and inspectors will be involved -and they won't be selected by you.!

That's true, But Mark's exercise appears to be to determine what the property is worth to sell. The other side is the buyer's issue, although if they can't get financing without putting in more cash because the selling price is too high, the original exercise would have been flawed for sure.

[Roger Feeley]

+1 on the appraiser

We walked out of a realtor when they tried to get us to sign an exclusive buyers contract. It meant that the realtor got paid even if he did nothing and we went out and found a property on our own.

I'm ok with paying a realtor a commission on a house that he finds and presents.
I'm not ok with paying a realtor for nothing.

We found another realtor that gave us a non-exclusive contract. She got paid only on houses that she presented and we were free to use other realtor(s) if we wanted. As it happened, she worked really hard and we bought a house through her. She earned every penny. The seller was some rich guy in Taiwan. he had bought the house for his son to live in while he went to college. He failed to notice that the house was a 30 minute car trip to campus. The son never lived in the house. The owner rented it for a few years and then put it on the market. All the paperwork had to be transmitted back and forth to Taiwan. We got a decent deal and lived there for 20 years.

[Jim Becker]

Roger, while we certainly did a lot of work and research ourselves for our property search in the last month or so, our realtor has earned his keep. And in the current market, buyers have to be VERY fast if they want to actually get something. (not to mention free with money and be willing to take some risk on other things) So we did find most of the properties we saw via various online sources simply because the second they hit and were of interest, our realtor was informed and took things from there to get appointments setup, etc., He also provided very sound advice on structuring offers to win. No way would I want to do this alone as a buyer right now. That said, the OP's in the potential selling situation, so my advice to not speak with a Realtor was to insure he wasn't obligated to pay if he sold the property himself to relatives. It's the other side of the coin in a different circumstance.

[Bruce Wrenn]

You said this is a rental house, with a long term tenant. In this situation, talk to a tax attorney, as you are going to have a hefty capital gains bill, plus you will have to recapture your losses. Makes sense to do a like trade. There are brokers who specialize in such.

[Mike Henderson]

Many years ago, we counted on the opinion of a realtor to help us set the price of a lake house we were selling. That was a profound mistake. We sold the house for around $40,000 less than it was worth. Shame on us for not doing our homework before the sale! Just remember that a realtor is absolutely not a disinterested and unbiased third party. On the other hand, houses in our neighborhood routinely sell for $20K to $50K above the asking price due to market conditions and buyers bidding up the price. Houses are in extremely short supply. My point is that I agree very much with Jim Becker. Do your own research before you trust either a real estate agent or an appraiser.

Yep, I learned a long time ago that a realtor is working for herself or himself, not for you. During normal times they will try to get the seller to drop the price because they're rather have a sale than no sale. If you drop the price by $10,000, their commission goes down by $500 or $600 (depending on commission) but you lose $10,000. If the house doesn't sell, they get nothing.

But around here, you don't put yourself at risk by talking to a realtor. Many people will get proposals from multiple realtors before they decide on one to use - and that proposal will include what they would list the home at. Until you sign a listing agreement the agent doesn't have any claim on your sale. You can decide to sell "by owner" after getting proposals and they don't get anything as long as you didn't sign a listing agreement.

Mike

[Also, as someone else said, you can often get a realtor to handle the sale (all the paperwork) for one or two percent if you already have a buyer. If you don't use a realtor, you'll have to pay a lawyer. You need someone knowledgeable to handle the sale. The risk to a realtor is whether they can come up with a buyer - since you have a buyer they don't have to advertise the house and take the risk of a no-sale.]

[Doug Dawson]

You said this is a rental house, with a long term tenant. In this situation, talk to a tax attorney, as you are going to have a hefty capital gains bill, plus you will have to recapture your losses. Makes sense to do a like trade. There are brokers who specialize in such.
Yes indeed, the tax considerations can be freakish. Consult the best people you can find, to deal with this.

[Mark Rainey]

Thanks for the excellent advice gentlemen. Yes, the tax considerations are significant.

[Alex Zeller]

A realtor is most likely just going to look at what sold around the house and guess at a price. Now they might just use Zillow or something like that. If they are selling the house it's not unusual for them to set the price high and then discount it over time if interest is weak. An appraiser will actually inspect the property and the properties that they are going to use to compare it to so any not so obvious differences will be accounted for. That's not to say that appraisers can't fudge the numbers. For example if your looking for a refi they can help make the numbers work.

[Thomas McCurnin]

The Buyer, actually the Buyer's Bank, will use an Appraiser to determine how much to loan to the Buyer, e.g., 80% loan to value, therefore it makes sense to hire an Appraiser to determine the value. The Real Estate Broker looks at values with an eye to what it might sell for, not the value pursuant to the Bank's guidelines.

[Jim Becker]

A realtor is most likely just going to look at what sold around the house and guess at a price. Now they might just use Zillow or something like that. If they are selling the house it's not unusual for them to set the price high and then discount it over time if interest is weak. An appraiser will actually inspect the property and the properties that they are going to use to compare it to so any not so obvious differences will be accounted for. That's not to say that appraisers can't fudge the numbers. For example if your looking for a refi they can help make the numbers work.

The realtor will use the MLS to research comparable sales, as will an appraiser. It would not be typical of them to depend upon the public listings like Zillow, even though Zillow, Redfin, Realtor, etc., all get their initial feeds from Bright MLS anyway. There is considerably more information in the MLS and linked to in the MLS than on the public sites. (I currently have access to a bunch of it and...wow...)

The thing with appraisals is that they are going to come up with different numbers if they are doing an appraisal for financing than they are with an appraisal for market pricing. The former is going to be more conservative because it has to reflect a more stable value that supports financing ratios.

[Perry Hilbert Jr]

When you hire an appraiser, be perfectly clear what your intentions are. Represented many clients in divorces and H & W 's appraisers were usually on different planets depending on who was buying who out. There was a HUD appraiser here that never even went out to the properties, just wrote up appraisers. Came in extremely high on one property and when questioned, she said the garage with the apartment added $X. Yeah that was great but the garage burned to the ground 8 years earlier and was never replaced. If you don't tell the appraiser what is going on, they may come in unrealistically too high or too low.

[Alex Zeller]

The realtor will use the MLS to research comparable sales, as will an appraiser. It would not be typical of them to depend upon the public listings like Zillow, even though Zillow, Redfin, Realtor, etc., all get their initial feeds from Bright MLS anyway. There is considerably more information in the MLS and linked to in the MLS than on the public sites. (I currently have access to a bunch of it and...wow...)

The thing with appraisals is that they are going to come up with different numbers if they are doing an appraisal for financing than they are with an appraisal for market pricing. The former is going to be more conservative because it has to reflect a more stable value that supports financing ratios.

When I bought my land a friend had full access. It came in useful. It showed the number of times the woman listed it and both the starting price and each drop each time she listed it. My offer was under the lowest amount she had asked a couple years before. I knew she was wanting to end paying property taxes so I knew sooner or later she would accept it.