Fab Real Estate Blog: Your Home Must Appraise for the Sale Price

Your Home Must Appraise for the Sale Price

When sellers and their agent are determining at what price to list their home for sale, it is important to remain realistic about the market and the home's current market value.

Price your home too high and buyers and their agents will probably ignore your home, or use it to sell other, better-priced homes.  If the home does sell at too high of a price, then it may not make it through the appraisal phase of the contract.  If the home cannot appraise at the purchase price, then the buyers may not be able to obtain financing.  Assuming there is an appraisal contingency in the purchase contract, this leaves the buyers three options: 

  1. Negotiate with the seller down to the appraised value
  2. Pay the difference in cash at closing between the appraised value and the purchase price, creating immediate negative equity in their home
  3. Cancel the contract.

Most buyers, except in an extremely tight and competitive market, will opt for options 1 or 3 above.  Thus, a too-high price does nothing for the sellers.


Price your home too low and you risk leaving money on the table.  No one wants to lose any money!


Work with your REALTOR to determine the correct list price for your home in your current market.  Price your home for that current market - not yesterday's or last month's market, and not what you believe tomorrow's market may be like.  Review comparable sales with your REALTOR - ideally, these will be home sales that have closed in the previous 3 months, within a 1/2 to 1-mile radius of your home.  (Some exceptions may be made for this, but generally speaking, appraisers want to use comparable sales in your town, within a 1 mile radius of the home, sale closed within 6-12 months at most, and within a 20% differential for gross living area or square footage)

In general, the following applies when determining which comparable sales you, your listing agent and any appraiser will utilize:

  • Homes should be of similar age.  If your home is 40 years old, you cannot use the new construction homes just completed up the street as comparable sales.
  • Homes should have square footage within 20% of your home.  If your home has 2,000 square feet of gross living area, you cannot use your neighbor's 3,000 square foot home that just sold as a comparable sale.
  • Homes must have sold.  You cannot use your neighbor's recent appraisal for a mortgage refinance as a comparable sale, even though their home may be the same model as yours.
  • In most cases, your basement is not included in the square footage of the home, even if it is fully finished.  (this may differ in some localities and for some home styles)

Keep these issues in mind and work with your REALTOR to determine the best list price that will result in the best sale price and terms for you.

Comment balloon 4 commentsDon Fabrizio-Garcia • January 02 2007 07:37PM


Don, excellent Post and very good advice.  The problem with Sellers is they always think that their home is the best on the block and worth more than it is.  To many Realtors out there that will list the house at the price that the Sellers wants them to, even though they know it will not sell, just so they can get the listing.  You should post this in the Real Estate Rockies Group.
Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) over 12 years ago
George - Thanks for the comment.  I see no reason to list an overpriced listing that won't sell - it will just cost me time and money and frustrate the sellers.  If your price is so high that there's no way it can appraise at that value, the deal won't go through anyway.
Posted by Don Fabrizio-Garcia, Owner/Broker/Trainer - Fab Real Estate (Fab Real Estate) over 12 years ago

Don - I'm with you, we do not take listings that are overpriced in today's "buyers market" - it would be a waster of our time and marketing dollars.  You hit all the pricing details right on.  What I find absurd is that when Realtors sell their own homes, they loose that objective perspective and overprice as well (a lot of the times).


Posted by Rick & Ines - Miami Beach Real Estate (Majestic Properties) over 12 years ago
Ines - When I sold my last home, I used a colleague of mine as the listing agent.  Why?  Several reasons, but mainly because while I believe I excel at pricing a home, I had difficulty doing so with my own home.  It was the emotions and the "my home is better than that home" deal that all our sellers go through.  I used an excellent agent who gave me some guidance so I could remove the personal and focus on the transaction at hand.  I tell FSBOs and prospective sellers that story - that even a REALTOR needs a REALTOR to sell a home!
Posted by Don Fabrizio-Garcia, Owner/Broker/Trainer - Fab Real Estate (Fab Real Estate) over 12 years ago