You get the house of your dreams and fix it up and take care of it the best way you know how over the years. Then, you may find once the kids move out or someone’s health changes that you could benefit from having a smaller home.
The first thing you get ready to do is find a real estate agent. Once that is done, and he begins to try to sell your home, he may ask you if you have had a recent appraisal done. If not, usually the real estate person can figure that out for you. If you happen to still own on a mortgage on the home, then you would want to sell and pay the mortgage off and hopefully end up with enough for the second smaller home you intend to buy.
This is where it can get sticky. If you had the mortgage holder do the last appraisal, then possibly it was over inflated. So now as you want to sell your home, you find that the value of your home and possibly what you still owe on it is no where near the current valuation of homes in your area. In other words, you are too high-priced for your neighborhood. You will either get stuck with the house or you will find a buyer but you may take a loss.
I saw this personally with a friend, and even though they listed with 2 or 3 different real estate agents (they even came down in the asking price), they never did sell it. They were forced to file bankruptcy.
You may be wondering why the bank would allow over inflated appraisals. Could be the simple fact that if the property is supposedly worth more, the lender, your friendly neighborhood bank, will be able to lend you more.
You really don’t even question this till you , like the above mentioned people, go to sell and try to make enough profit that you can pay the current mortgage off.
The person doing the valuation is supposed to base it on current similar properties. My advice to anyone re mortgaging, etc…is to question the final appraisal. If you believe it to be too high or out of line compared to other properties in your area, you should question it.