If your plans are to use an Agent to sell your house, the easiest
way of determining value is through a Comparable
Market Analysis--a CMA--which the Agent will
develop for you. If you plan on selling your house on your own, and do not want to deal with Agents (who, in many
cases will develop a CMA for you in the hope of getting your future business), the easiest way is to have a professional
appraisal done on your home. Or, if you have a lot of time on your hands, and if Deed Recordings are publicly available
and easily accessible in your locality, you can also search for all properties sold in the last year or so that
are similar to your house.
An home appraisal is an opinion of worth of an item of value, whether it is a diamond, an automobile or your house.
Depending on the size of your house and your location, a professional appraisal should cost somewhere in the $350
to $500 range. For your investment, you will get a complete analysis of the estimated value of your home. Factors
such as condition, proximity to services, and overall neighborhood values all will all be taken into account. There
are three general approaches to determining the value: the cost (or replacement) approach, the comparison approach, and
the income approach. (Unless your property is commercial or a rental property, the income approach
will not apply). In the cost/replacement approach, a determination is made as to what the cost would be to replace
(rebuild) your home in today's market. In the comparison approach, the appraiser will, as in a CMA, determine what
comparable properties have sold for in the last 6 months to a year. This approach will directly compare your house
to these other properties, adding to value for special items that your house has, or deducting value for items
that your house lacks (in relation to the comparables). In all likelihood, this comparison approach will give you
the most accurate estimation of the worth of your house.
Common Questions about Home Appraisals
If I pay for an appraisal now, will the buyer be able
to use it? A couple of factors will determine whether
or not a buyer can take advantage of your appraisal. The most important lies with the policy of the lender which
will be handling the buyer's financing. It is completely within the lender's rights (and more than likely) that
they will want to order a new appraisal. In addition, there is the question of timeliness. If you have a professional
appraisal done now and it takes 4 months to get a contract on your house, it is probable that the lender will require
a more recent appraisal.
Is the value locked in stone? Absolutely not. A home appraisal, no matter how scientific, still ends up
being the professional opinion of the appraiser. The appraiser must compare, for example, the condition of your
house in relation to the comparable properties, which to some degree is a judgment call. Nevertheless, an appraisal
will give you a reasonably good idea where your house fits in relation to recently sold properties. From that point
you are well on your way to setting a fair price.
Where can we find an appraiser? You will need an appraiser in your local area, so you can check
your yellow pages. Online, a service such as ServiceMagic offers
a free service to locate appraisers in your immediate area. More information.