Real Estate Value

Real Estate Value

Real Estate Value
What is​ real estate value? It isn't what you have into your house .​
It isn't what you feel it​ is​ worth .​
It is​ what the​ market will pay .​
How do you figure out what the​ market will pay? for​ single family homes, the​ best way is​ by seeing what similar homes have sold for​ .​
Figuring replacement cost isn't very useful .​
It's difficult to​ say what land is​ worth in​ a​ city center where none is​ left for​ sale, for​ example, and​ tough to​ gauge depreciation of​ the​ home itself .​
Valuation from replacement cost is​ used as​ a​ secondary method, and​ for​ unique homes that can't be compared easily with others .​
However, the​ primary method of​ real estate appraisal used for​ homes is​ a​ market analysis using comparable sales.
Real Estate Value 101
First find at​ least three similar homes in​ the​ same area that have sold within the​ last year, and​ preferably within the​ last six months .​
You can find this information is​ in​ county records (sometimes online now), or​ from a​ real estate agent with access to​ the​ multiple listing service .​
Make sure you have the​ basic sales information: sales price, terms of​ sale, description of​ the​ property, etc.
Here is​ how you use this information to​ find real estate value .​
Write down the​ selling price of​ your first comparable .​
Review the​ description item by item, adding to​ the​ sales price of​ the​ comparable for​ each thing it​ doesn't have that your subject home has, and​ subtracting for​ each thing it​ has that your subject home doesn't have.
This sounds confusing, but it​ will make sense once you try it​ a​ couple times .​
For example, 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.

What you are doing is​ rectifying differences, to​ see what the​ comparable home WOULD have sold for​ if​ it​ was just like yours .​
Suppose a​ comparable sold for​ $140,000, with one less bathroom than your subject home, 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 .​
You subtract, say $4,000, for​ the​ paved driveway it​ does have, that your home doesn't have .​
$140,000 plus $15,000, minus $4,000 gives you a​ comparable sales price of​ $151,000.
Do this with all differences between the​ subject home and​ each comparable .​
Once done, average the​ three comparable prices .​
If, for​ example, the​ three comparables now have adjusted sales prices of​ $151,000, 162,000, and​ 149,000, add the​ three figures and​ divide by three .​
The indicated value of​ the​ home is​ $154,000.
All appraisal is​ an​ inexact science .​
You might only find comparables sold over a​ year ago, and​ have to​ estimate appreciation in​ the​ area .​
If a​ comparable sold with seller financing, you have to​ decide how much this affected the​ price .​
Still, for​ all of​ it's flaws, for​ single family homes this is​ the​ most accurate method for​ finding true real estate value.

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