Appraisals vs Comps
In every Real Estate business, knowing the property’s real market value is definitely one of the most crucial stages. This is where an appraisal comes in. Most commonly termed as an “Opinion of Value”, it works by producing an evaluation or estimate which is derived through making use of the three main “Common Approaches to Value.” The application of these three common approaches is actually considered to be a formal process which is a very typical way to assess a certain home or property.
The first of the three methods is called the Cost Approach. Cost Approach would normally cover the expenses that would be necessary to improve the property so as to make it more attractive to the buyers. Evaluation in consideration of the property’s physical deterioration or damages would still be under this approach. Furthermore, the land value must also be kept in mind.
As some real estate professional would advise, you can surely improve the home you are selling for it to be easily snatched up by buyers. However, you must also maximize your property’s potential and really make sure that the changes you will make will make the market value higher and not otherwise. How can you add a particular amenity that will really increase your chances of a good deal? First of all, you must know your local market. Considering the climate in your area is also a good start.
Currently, the best return of income from renovations may be generated from refining your kitchen. A recent study revealed that investing $20,000 into a kitchen remodel would increase the market value of the home by about $17,500. That means 88% Return On Investment (ROI). Also, bathrooms would be second to the list with 85% of ROI. Additional bedrooms and baths don’t really hurt, but you must make sure that the changes are not overwhelming and it doesn’t become overbuilt for your neighborhood. Some buyers are still particular to their homes’ size.
The Sales Comparison Approach is said to be the most commonly utilized among the three. As the key word ‘Comparison’ suggests, this approach figures the likely sales price of the house by comparing it to the houses or properties within the area. In general, the Sales Comparison Approach is the most accurate indicator of a property’s market value.
Finally, we have the Income Approach. This generally determines the market value of income-producing properties as to what an investor would most likely pay based on how much profit would be reaped from the property.
Since we already covered what an appraisal really is, here comes the next question: Who does the appraisal? Well, we formally call the people that do the evaluations ‘Appraisers’. They are licensed, certified professionals, who have made careers out of valuing properties or homes. It is definitely not easy to become a licensed appraiser. You have to go through an intensive training or arduous studying. Not only that, you would also be required to satisfy various on the job experience requirements. You think that’s simple? Well, in addition to those mentioned, appraisers must also obey a meticulous industry code of ethics and observe national standards of practice for real estate appraisal. Also, to make sure that the appraisal reports are trustworthy, all results are guaranteed by the Uniform Standards of Professional Appraisal Practice or USPAP.
Obtaining appraisals are not only limited to knowing how much your property would sell for. There are a lot of reasons why a knowledgeable appraiser is needed. Aside from real estate and mortgage transactions, appraisers are also being sought for their expertise in order to secure an appraisal report for reasons that include but are not limited to the following:
- If a client is applying for a loan
- Wanted to reduce their tax burden
- Trying to challenge improperly assessed property taxes
- To handle an estate
- To gain a negotiating tool when purchasing a home
- To ensure parties are provided just compensation in eminent domain cases
- If government agencies, like Internal Revenue Service (IRS) require it
- In possibility of a lawsuit involvement, especially since appraisals are defensible and may stand up in legal court
It is still important to understand that appraisers are not home inspectors. They will not conduct a full home inspection. A different inspector, which must be a third party, would be responsible for scrutinizing every available structure, including of course both the electrical and mechanical systems, from the roof to the foundation. In general, the result of the home inspection would be written as a report which would include the condition of every amenity such as the heating system, air conditioning, electrical, plumbing, the structural capacity of the home, the foundation and other visible structures.
Is it really necessary for you to refer to an appraiser at all times?
Here’s an honest answer. No.
Aside from appraisers, real estate agents may also assess or evaluate a certain home or property. However, they are no longer referred to as appraisals but as Cost Market Analysis (CMA) or Comparable Analysis. CMA is said to be the best method available to sellers for them to learn their home’s current value so that they would be able to select the best selling price possible. It works similar to the appraiser’s most accurate method, the Sales Comparative Approach. By going through recently sold properties that are similar to the subject property within the area, the real estate professionals may then compare in order to come up with a reasonably accurate estimate. They may also adjust in consideration to the feature differences and go over currently listed similar properties near the location. This would allow an assessment of the current competition and might lead to an increase or decrease in the estimate based on the sold properties.
So unless you require an appraisal for legal reasons, then you may just ask your reliable real estate professionals for help. The Fejeran Group, being one of the most sought after and trusted real estate teams in North Dallas, Texas, is readily available to help you.
The Fejeran Group can assist you in formulating a fair and credible assessment of a property’s market value, in the support of real estate transactions. Lead by Sheila Fejeran, one of the top real estate agents in DFW, The Fejeran Group ensures every client that their expert analysis would always provide an accurate market value.
If you want to sell your home, it’s not so easy and it’s certainly not that simple. The real value of your home is so much more difficult to predict since some of the readily available tools to home sellers can be trustworthy or not as precise. Indeed, online home valuation sites are really fun to play with, but they are based on past sales, not current market factors. Newspaper listings may also give you some idea, but most properties are so different that it’s difficult to compare.
Rest assured, The Fejeran Group strives to give you the best selling price and not only that, they would also help you strike a sweet deal. The team guarantees client satisfaction by conducting an in-depth analysis of a home’s worth in the current market. So if you are thinking of letting go of your property, make sure you won’t be selling it for the wrong price. Setting the price too low means you’ll be entitled to less than your property’s worth. While setting it too high might not get you a buyer at all. The Fejeran Group will want to complete a CMA on your home before helping you sell it. Avoid getting less than what you deserve, contact The Fejeran Group now.