Real Estate Appraisal Do It Yourself

Real Estate Appraisal Do It Yourself

Real Estate Appraisal - Do It Yourself
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.

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