3 Reasons Why You Should Never Get A Real Estate Agent AppraisalWhy FREE Appraisals Are Expensive Mistakes
There are three (3) reasons why you should NEVER get an appraisal before selling your home.
An appraisal is the most expensive ‘FREE’ thing in real estate.
1. Conflict Of Interest
Did you know that an appraisal is not actually called an appraisal behind your back?
It is called a “Listing Presentation” by the real estate sales industry.
This is because it’s NOT about giving you an accurate market value for your home, but about winning your listing, or the right to sell your home.
This makes it a conflict of interest because you want to find out the accurate market value for your home but agents know that this may not win your business.
In other words, if an agent tells you what he REALLY thinks your home is worth, you may not like it and therefore, not choose the agent.
Agents also know that you will get 3 – 4 appraisals and all things being equal, you’re likely to choose the agent who promises you the most enticing sale price that you want to hear.
For this reason, there is HUGE pressure on agents to give you an inflated appraisal, even if it’s WRONG.
One symptom is when they ask you what price you’d like to achieve BEFORE they give you an appraisal.
They are fishing for a number to agree with and promise to achieve or even exceed.
There is even a name for this practice in the industry.
It is called “Buying The listing”. Many agents will ‘buy your listing’ with a promise of an inflated price to lock you into a contract.
They do this because they know that once you’re locked in, they can condition your price expectations down.
Many real estate agents are actually trained in the process of conditioning your price expectations down!
2. Notoriously Sloppy & Inaccurate
The second reason you should never get an appraisal is that they are notoriously sloppy and inaccurate, with little to no effort behind them.
The simple fact is that not even the most active agent in an area will sell every property.
So, unless they thoroughly research every other sale by other agents, they can’t give you an accurate appraisal.
A good agent will win around 5 clients for every 10 appraisals. This means that every second appraisal (listing presentation) is a waste of their time.
Considering this, how much effort do you think they will put into an appraisal, and how thorough and accurate will these appraisals be?
Most real estate agents will actually print their appraisal without even having seen or been inside your property first.
They simply look at old and outdated images of your home online and print an automated ‘appraisal’.
Others will give you an appraisal of value on the spot before going back to the office to do thorough research.
The only reason most people don’t question any of this is because they assume that a local real estate agent knows local values like the back of their hand.
Why do you think a valuer inspects a property BEFORE they generate the valuation report?
There is a reason why a valuation costs $500+ and an appraisal is free.
YOU GET WHAT YOU PAY FOR!
RP Data enables agents to print a ‘professional looking’ but automatically generated CMA (comparable market analysis) in a matter of minutes without the agent having to put in any research, effort or analysis, or even inspect your home.
As a matter of fact, this is often done by an office junior.
For this reason, most of the ‘appraisals’ agents do are professionally dressed, confidently presented, yet inaccurate guesses that serve only one purpose. To get you to sign on the dotted line.
3. The Underappraisal
There is a third and last reason why you should never get an appraisal.
In some cases, savvy, cunning and unethical real estate agents will give you a low appraisal if they know that they can get away with it.
They do this to ensure that your home will sell really quickly at that price (or just above it). This way, they look like a rockstar if they can ‘exceed’ the appraisal and achieve a quicker sale.
More importantly, they can pick up their commission sooner.
Some agents have been known to deliberatly give a low appraisal in order to convince the vendor to pay an even higher rate of commission over and above the standard percentage, if they exceed the figure.
Of course their appraised low figure is easy to exceed and the agent pockets an astronomical reward, which is well over a normal commission – also known as “overs”.
The uninformed majority believe that they can protect themselves and mitigate against these risks by getting 3 or 4 appraisals from different agents.
The problem is that they’ll never know which appraisal (if any) is accurate.
Just because two or even three of them are similar, doesn’t make them either accurate or right.
It goes without saying that with each appraisal you get, you are inviting each agent to badger and hound you until you submit and list with them, or tell them in no uncertain terms where to go.
Once you’ve let an agent into your home, the appraisal isnt’ the only trick they will use to get you to sign up.
The other common trick, which most vendors fall for is the: “I know some keen buyers who missed out on a home nearby.”
If you’d like to inform yourself about this trick, please read point 3. on THIS PAGE.
An Appraisal Is Just The Tip Of The Conflict Of Interest Iceberg
After the appraisal, there are four more conflicts of interest between you and a real estate agent. Most sellers aren’t aware of any of them.
There are also two specific reasons why home sellers have no idea that they’ve sold for less than they could have – even if they are convinced that they’ve done well.
That’s how Australian homeowners quietly lose 5 – 6 figures (3% – 9%) without a receipt, without a clue, and without ever knowing.
Discover the other four conflicts of interest, the two reasons sellers never realise they’ve undersold, and how to make sure it never happens to you.