Getting a Home Evaluation Before Making an Offer

When considering a home purchase, many people will rank “overpaying” for a home at the top of their list of fears prior to submitting an offer. But how would you know if you are overpaying? Is there anything you can do to minimize the risk of paying too much and getting suckered into a poor deal? The answer is: absolutely!

When buying a home, there are different “checks and balances” along the way that help protect a homebuyer from making a poor buying choice based on pricing. Regardless of any of these external checks and balances, it is important to get clear about your goals and motivations, as well as your limits, before starting the home buying process. Talk with an honest and competent real estate agent about prices in your area as well as market trends that are currently happening. Do your own research and fact check what you are being told. Also, consider wisely how much weight you will give to the opinions of neighbors, friends, family, coworkers or acquaintances. When someone hears you are “in the market”, their opinions will follow shortly after, whether they are welcome or not. While it is wise to consider the opinions of those you trust who offer experience and an objective view, be wary of others who project their own fears or wants on to your situation.

When buying a home with a mortgage loan, it is typical for the lending institution to require an appraisal as part of the purchase process. By having a third party appraisal performed, the bank is protecting their interest in making sure they are not lending you more money than the home is worth. However, some people will opt to have an appraisal performed prior to making an offer. While there are times where this would make sense (for example, it is a highly unusual home in some sense that may make it an outlier in terms of value, warranting an appraisal to decide what the fair offering price is), most times, it may not. To have a full appraisal performed, an appraiser must gain access to the interior and exterior of the home to complete their evaluation. Many homeowners would not readily welcome this inconvenience if they have other serious interest in the home. Even if a homeowner would allow this, if you are getting a loan, you will likely have to pay out of pocket for a second appraisal from the bank’s pool of unaffiliated appraisers. Most institutions will not use an appraisal you obtained prior to opening escrow for official use. There may be other reasons that you choose to perform an appraisal prior to offering on a home, but if it is only to obtain the value of a home for the purposes of not paying too much, a competent realtor can perform a comparative market analysis for you, free of charge.

When your realtor performs a CMA (comparative market analysis), they will use their local knowledge and available sold homes to form an opinion on what a home is worth. By looking at comparable sold homes (in terms of size, condition, best and highest use, location, attractors and detractors) a realtor should be able to tell you with confidence the range in which a home may fall in value. This does not guarantee a favorable appraisal but would give you a good idea of whether you think the price you are getting is fair. While you will want to know what pending and active homes are going for, these prices are not as important as the price a home ultimately closed at. This is a better reflection of true current value.

Regardless of the checks and balances or advice you obtain from others (your realtor included), it is most important that you trust your instincts. If a home purchase doesn’t feel right, it probably isn’t. Trust your gut and get the facts around the value of the home however you feel most comfortable and don’t offer unless you are totally onboard. By valuing your own intuition, you may just save yourself the stress and heartache of buyer’s remorse down the line!