M.T.C. Real Estate Appraisal Company, LLC
FYI - Previous Posts [One and Two]
FYI - Previous Posts [One and Two]
Part One: ESTABLISHING YOUR HOME'S MARKET VALUE
Knowing the true value of real estate is more important than ever and so we evaluate properties based on objective criteria, in-depth knowledge of local markets, and time-tested judgment and experience. We identify and analyze the variables that affect the value, often seeing what other appraisers overlook. Therefore, our approach to real estate appraisals is always the same: know the market.
Establishing your home’s market value is very important because it gives you greater control over your property taxes, insurance premiums, and the sale or refinancing of your home. Market value is how much a home would sell for under normal conditions. Normal conditions do not include sales where the buyer or seller is under pressure to act, for example, career/job relocation, death of a family member, or divorce. Market value is basically an educated guess, but it can be fairly accurate by applying the right method and considering all the important details. These are some of the factors that may affect your home's market value:
1. External Characteristics
Condition of the home
Size of the lot
Popularity of an architectural style of property
Condition of the sidewalk
Condition of the road (paved/unpaved)
2. Internal Characteristics
Size/Number of rooms
Quality of construction
Condition of the appliances
3. Supply and Demand
Number of homes for sale versus the number of buyers
How quickly the homes in your area are selling
Desirability for a particular school district
Desirability for a particular neighborhood
Proximity of emergency facilities (hospital, fire, police, etc.)
Here at M.T.C. Real Estate Appraisal Company, LLC, we use the sales comparison approach to estimate your home's market value because this is the primary method used by professional appraisers and real estate agents to determine the market value of homes. We begin the appraisal process by researching recent sales of similar properties in the local area. The sale prices of these properties will provide a good place to start in estimating the value of your home. We try to find the sales of at least three properties that are comparable to your home that were sold under normal conditions. Most importantly, we look for properties that were sold at market value.
Part Two: The Market and How Comparables Impact the Sale of Homes
In determining whether a sold property is comparable or not, there are several characteristics that help make this determination. These include:
the size/square footage of the home and the lot
- home style
In looking at the size of a property, square footage is a commonly used measurement of which there are two types. The first is total square footage, which consists of the entire home, including patios. The second is “under air” square footage that benefits from fixed air conditioning and/or heating systems.
Other aspects to consider involve the neighborhood itself because some streets could have homes that are more upscale and expensive than others. In some suburban and/or urban communities, you might also find some parts that are nearly rural. Because of this, using the distance from one point to another may not be an accurate way to determine if nearby neighborhood comparables are in fact comparable or similar. Simply stated, to be truly comparable, adjustments may have to be made to the home’s value even though it is within a short distance of other properties. The location of school districts and the ranking of schools also play a factor and might require additional adjustments.
Another important consideration is determining how recent the sales occurred. Sales that occur within 90 days are generally considered as being both ideal and favored. However, in some cases, there may not be enough closed sales of similar homes and some lenders will therefore go back 6-12 months in their search for comparable properties.
There is the likelihood that you probably won't find an exact comparable sale. To account for this, the sale prices of the comparable properties will need to be adjusted. An analysis will be required to determine whether these differences increased or decreased the sale price, and, if so, by how much. The adjusted sale price will be an estimation of what the property would have sold for if all the characteristics had been the same. You might also find the following information helpful if you are a home buyer or a home seller.
As a home buyer, here are some things you need to know:
the appraisal will be one of the first steps in the closing process
if the appraisal comes in at or above the contract price, the transaction should proceed as planned
if the appraisal comes in below the contract price, the transaction may be delayed or even derailed
appraisals help buyers avoid overpaying for homes, but a seller may feel that a low appraisal is inaccurate and be reluctant to drop the price
As a home seller, here are some things you need to know:
a low appraisal, if accurate, means you will have to lower your home's price to get it sold
no one wants to overpay for a home and therefore, holding out for an all-cash buyer who doesn’t require an appraisal to close the sale may not necessarily get you a higher sales price
nearby foreclosures may lower the appraisal value of your home, but you may be able to convince the appraiser that your home is worth more if it's in significantly better condition than any of those properties.
Whether buying or selling a basic understanding of how the appraisal process functions can only work in your favor. More to come on the Appraisal Process.