There are actually two home values, the homeowner’s value and the potential buyer’s value. Unfortunately, both values are emotional and not facts based on market data. The owner has time at home, family, years of memories, children growing up, maintenance, perhaps blood sweat and tears in room additions, kitchen or bathroom remodel. Obviously, the owner values his castle highly and rightly so.
Buyers, on the other hand, see things differently and act on different emotions. Buyers look for that emotional spark at the first sight. The most important first impression is what drives potential buyers … at first. From there, the first impression quickly turns to affordability, cost of entry into the house, closing costs, monthly notes, taxes. Should I make an offer? What is the minimum that I should offer?
Market value is somewhere between these two emotional extremes. This is where the appraiser comes in with an objective opinion backed by market data. Market value is defined as the price that a willing buyer will pay to a willing seller for a product or service. In real estate, this is known as an “independent transaction”, which means that both the buyer and the seller acted voluntarily and not under duress.
Where does the appraiser start and how does he get to those magic numbers called market value? It is not magical at all; it is a methodical series of analytical steps.
First, the appraiser does a physical inspection of the property, determines the size of the living space, and takes note of all the amenities, such as the number of bedrooms and bathrooms, the garage, laundry facilities, storage areas, and any special features. , such as a fireplace, pool, patio or outbuildings. After a complete inspection, the appraiser has a starting point to arrive at the market value. With all the physical data collected, the appraiser uses two or three methods to arrive at the market value. The three methods are: Market Focus – The appraiser looks for comparable homes in your neighborhood, subdivision, or within your city with comparable neighborhoods. Cost Approach / Cost Analysis – The appraiser calculates the cost to build your home using current material and labor costs, less depreciation for structural damage, poor maintenance, and neighborhood disintegration. Income approach: The income approach does not apply to residential market value. This approach applies to income-generating properties such as residential duplexes, apartments, and of course commercial properties.
If the property being appraised is a residential structure, many factors beyond the physical attributes of the property are taken into consideration. The appraiser also considers the compatibility of your home with the neighborhood, for example, does your neighborhood add or reduce the value of your home? This implies pride in property factors, which occur in most communities. However, location, location, location drives the final analysis of the market. The appraiser considers the ebb and flow of growth and its direction within your town or city due to socioeconomic factors. Additionally, future city planning goes a long way toward keeping your home in its current value.
In short, determining the value of your home is a complex procedure. The appraiser must have a good understanding of his city and all the socioeconomic factors that drive the market. This requires years of observation, study and considerable research on the part of the appraiser. When considering a professional appraisal, it is best to choose an appraiser who is certified and has any of the following professional designations: MAI (Member of the American Institute) ASA (American Society of Appraisers) SRA (Society of Appraisers) CRA (Certified Real Estate Appraiser) )) IFAS (Independent Rate Appraisal Society). This list includes some of the most recognized professional appraisal organizations in the United States.
John tatman