Should You Hire A Real Estate Appraiser Before You Buy A Home

You can, but it will be costly and the results may be of dubious value. Appraisers have a variety of methods to determine value¡ªfor income property, they look at rents; for new construction, they look at costs. But for existing residential real estate, they almost always look at recent sales of comparable properties, the same thing you can do. Sometimes having an “official appraisal” can help convince a seller to take a lower price. On the other hand, who’s to say that the appraiser you hire won’t come in with a price higher than you want to pay?

Most residential appraisers work for lenders. They are called out to determine if the property is worth enough to justify the mortgage that the buyer wants. They consider comparable properties in making their decision.

However, it’s important to understand that there is no one official price for a property. Sometimes lenders will hint that they want to make the loan, so perhaps the appraiser stretches a little bit to come up with a higher price. Or perhaps a lender suggests that the government is scrutinizing new loans very carefully, so the appraiser is more conservative.

And what about market trends? What if prices just took a jump (or fell) and there aren’t any recent comparables to confirm this? The appraiser can only make a good guess, the same as you.

A few years ago I accompanied an appraiser to an area of custom homes (each one was different). There were no real comparables, and prices were going up. So the appraiser took his best shot. When he expressed a value of $175,000, I told him I thought he was $100,000 too low. He just laughed. But the property sold for $260,000 with the seller carrying the financing, so no institutional loan was necessary. Armed with that comparable, the next time the appraiser went out in the area (for a home with about the same square feet), he came in at $270,000. He was just doing it by the book, while I was guesstimating by the seat of my pants. But, I happened to be right.

The upshot is that I personally don’t think appraisers are necessary or even useful when trying to come up with an offering price on single-family residential real estate. (It’s quite different for commercial, multiple-family, or industrial property.) But, if you want to use one, be sure you get one that’s good. Appraisers who offer the American Institute of Real Estate Appraisers (MAI) or Society of Real Estate Appraisers (SREA) designation have usually been well-trained.

jacqueline is a blogger with great interest in writing on latest trends on Real Estate. She had recently reviewed House and Land Packages around Cranbourne and found The Hunt Club to be a perfect residential development in Victoria.