by: Steve Gillman
For single family homes, there are two basic methods used in real estate appraisal. They are replacement cost analysis, and using comparable sales. A third appraisal method, based on capitalization, is used for income properties, and is covered in another article.
In figuring replacement cost the question is: What would it cost to buy this land and put this house on it? If the land (improved) would cost $40,000, and the house could be built for $150,000, the value indicated would be around $190,000 - if the house is fairly new. If it has used up 10% of its useful life, you can deduct $15,000 for depreciation.
Replacement cost is not really a very useful measurement. It is difficult to say what the land is worth in a city center where none is left for sale, for example, and tough to gauge depreciation. It is used as a secondary method, and for unique homes that can't be compared easily with others. The primary method of real estate appraisal used for homes is a market analysis using comparable sales.
Real Estate Appraisal 101
To get a good idea of what a home should sell for, you need to compare it to homes that have sold. Find at least three similar homes in the same area that have sold within the last year, preferably within the last six months. This information is available in the county records, or from a real estate agent with access to the MLS (multiple listing service).
Now the confusing part. You start with the selling price of each of your comparables. If your subject home has a second bathroom, and the a comparable doesn't, you add the value of the bathroom to the sales price of the comparable. If a comparable home has a blacktop driveway, and the subject home doesn't, you take the value away.
You are rectifying differences, to see what comparable homes would have sold for if they were like yours. So if a comparable sold for $140,000, and a bathroom is worth $15,000 in your area (ask a real estate agent for help with these figures), you ADD $15,000 for the bathroom it doesn't have. Then you subtract, say $4,000, for the paved driveway it does have. This gives you a comparable sales price of $151,000.
You do this with all differences between the subject home and each comparable. When done, you average the three comparable prices. So if the three comparables have adjusted sales prices of $151,000, 162,000, and 149,000, you add the three figures and divide by three. The indicated value of the home is $154,000.
Of course all appraisal is an inexact science. If you can only find comparables sold over a year ago, you have to estimate appreciation in the area. If one sold with seller financing, you have to decide how this affected the price. For all of it's flaws, however, for single family homes, this is the most accurate method of real estate appraisal.
About The Author
Steve Gillman has invested in real estate for years. To learn more, and to see a photo of a beautiful house he and his wife bought for $17,500, visit http://www.HousesUnderFiftyThousand.com.
|
Real Estate - Advertising Your Own Home
Real Estate - Advertising Your Own Home
by: Jay Bauder
"House and Lot For Sale! Direct Buyers Only!" -- These popular ads can be found everywhere, including the internet...
Many people rely on the internet to sell their property because it's a great way to advertise. There are a growing number of websites that allow posting of "for sale by owner" ads. These websites target buyers from all around the world. Internet ads are also being proven worthy of consideration because of their cost-effectiveness as compared to other forms of advertising.
Taking a sneak peak at lists of properties which are for sale by owners on the internet can help you gather indispensable information. You can also access handbooks and other sources of information that are available on the internet.
Every day, thousands of people become potential buyers of products and properties that are for sale by owners. They go through newspaper ads, banner ads, search...
Real Estate - Advertising Your Own Home
Real estate > Real Estate - Advertising Your Own Home
Finding The Best Real Estate Agent
Finding The Best Real Estate Agent
by: Ingrid Macher
Finding the appropriate time to leave behind the unforgettable moments that you experienced in your home is sometimes stressful, but it's always the time to move forward to get a new investment. Statistics in Las Vegas real estate show that the average family is ready to jump into a new home almost every 5 years, so how you interview the best candidate is going to help you to sell your most valuable asset and move to the next step of finding your next "dream home." Here is some advice for you:
Find an agent with a marketing plan that is designed to incorporate all the resources, tools, and systems accomplishing your goals and needs as the seller of a real state property.
Look for somebody who is going to get you the most amount of money in the least amount of time and the least amount of inconvenience.
Sometimes looking around and interviewing so many candidates can make you...
Finding The Best Real Estate Agent
Real estate > Finding The Best Real Estate Agent
Real Estate Market Conditions
Real Estate Market Conditions
by: Kim Polinsky
The winter season gives real estate agent/brokers a chance to sit back and evaluate the previous season-Yes? No! These days, the chance to sit back is merely a dream. Agents and Brokers must build their business with new market niches in order to stay on top of their field.
Yes, the ?bubble? has burst. Burst into a finely tuned, quickly burning engine that has grown to a new level of expertise and profits!! Real estate marketing IS changing, and the newer, inexperienced, hungry agent/broker is finding a level playing field on the new path of real estate.
Recently, the trade is encouraged by the fact that this year, unseasonably warm temperatures found across the nation are fueling not just tourism. The warm temperatures are attracting ready and willing buyers, matched with sellers willing to turn some profit.
Mountains in Colorado, beaches in California, the list goes on and on regarding...
Real estate > Real Estate Market Conditions
The Five P?s of How To Be A Landlord And Manage Real Estate!
The Five P?s of How To Be A Landlord And Manage Real Estate!
by: David Schneider
Many real estate investors become frustrated with the tenants and the toilets. And when you look at the way they manage, it's no surprise.
The most important part of investing in rental real estate is to have a good property management system. In any successful management system there are the five P?s.
They are Property, People, Paperwork, Policies and Procedures. Lets look at each of these P?s individually.
>> The Property must be managed. You need to have a plan to make repairs and do maintenance. This should be something that is automatically done throughout the year and include such things as checking for leaky pipes, checking smoke and fire detectors, caulking and painting or any other maintenance items.
>> The People. This is the most difficult part of the management process. You need to put in place specific systems to deal with all the...
The Five P?s of How To Be A Landlord And Manage Real Estate!
Real estate > The Five P?s of How To Be A Landlord And Manage Real Estate!
Sell Your Real Estate Notes
Sell Your Real Estate Notes
by: Steve Gillman
People sell real estate notes to raise cash quickly. A real estate note is just the loan document created when you financed the sale of your house or investment property. It could be a mortgage note, or a land-contract or contract-for-sale. The point is that the buyer is making payments to you, and you want to cash in.
You can sell the entire contract, or just a certain number of payments if you want. The buyer of your property will have the same terms and payments. He'll just be making those payments to somebody else.
Selling real estate notes can be an intimidating process. You know you won't get the full face value for your note, but will there be other fees you have to pay too? How do you know if the buyer is reputable? What is a normal discount on a note? Here are some guidelines to follow:
1. No upfront fees. If they ask, go someplace else. You should be able to find many note buyers...
Sell Your Real Estate Notes
Real estate > Sell Your Real Estate Notes
Why Real Estate Investment?
Why Real Estate Investment?
by: Rik Foote
Why should you invest in real estate?
Well, investing in real estate for profit is one of the most popular approaches to generating additional income in the United States today.
In fact, if you pay attention to recent press you will have seen numerous reports about the real estate investment craze that seems to be sweeping the Nation.
When done carefully and intelligently, real estate can yield fantastic benefits that can not be achieved through any other type of investment.
Here are just a few examples of why real estate investing can be such a powerful wealth generator.
1. Real Estate Markets Are Slow to React - Although real estate, like everything else, has ups and downs, it is generally a lot slower to react than the stock market.
For example, you won?t get up in the morning and discover that your real estate investment is worth ten or twenty percent less...
Real estate > Why Real Estate Investment?
Real estate Real Estate Appraisal - Do Your Own
Real estate
This page loaded in 0.05508 seconds.