| Actually, there are two home values, the | | | | at market value. The three methods are: |
| value to the homeowner and the value to the | | | | Market Approach: The appraiser searches for |
| potential buyer. Unfortunately, both values | | | | comparable homes in your neighborhood, |
| are emotional and not facts based on market | | | | subdivision or within your city with |
| data. The homeowner has time in the home, | | | | comparable neighborhoods. Cost Approach/Cost |
| family, years of memories, children growing | | | | analysis: The appraiser calculates the cost |
| up, maintenance, perhaps blood sweat and | | | | to build your home at current material and |
| tears in room additions, kitchen or bath | | | | labor costs, less depreciation for structural |
| remodeling. Obviously the owner places a high | | | | damage, poor upkeep and neighborhood |
| value on his/her castle and rightly so. | | | | disintegration. Income Approach: The income |
| | | | approach does not apply to residential market |
| The buyers on the other hand see things | | | | value. This approach applies to income |
| differently and act on different emotions. | | | | producing properties such as residential |
| The buyers are looking for that emotional | | | | duplexes, apartments and of course commercial |
| spark at the first viewing. The all-important | | | | properties. |
| first impression is what drives the potential | | | | |
| buyers...at first. From there the first | | | | If the property being appraised is a |
| impression quickly turns to affordability, | | | | residential structure many factors are taken |
| the cost to get in the home, the closing | | | | into consideration beyond the physical |
| costs, the monthly notes, the taxes. Should I | | | | attributes of the property. The appraiser |
| make an offer? What is the least I should | | | | also considers the compatibility of your home |
| offer? | | | | within the neighborhood, such as does your |
| | | | neighborhood add to or reduce the value of |
| Market value is somewhere between these two | | | | your home? This involves pride in ownership |
| emotional extremes. This is where the | | | | factors, which occur in most communities. |
| appraiser comes in with an objective opinion | | | | However, location, location, location drives |
| backed by market data. Market value is | | | | the final market analysis. The appraiser |
| defined as the price a willing buyer will pay | | | | considers the ebb and flow of growth and its |
| to a willing seller for a product or service. | | | | direction within your town or city due to |
| In real estate, this is known as an "arms | | | | socio-economic factors. In addition, future |
| length transaction" meaning both buyer and | | | | city planning contributes to a large degree |
| seller acted willingly and not under duress. | | | | in your home maintaining its present value. |
| | | | |
| Where does the appraiser begin and how do | | | | In summary, determining the value of your |
| they arrive at those magic numbers called | | | | home is a complex procedure. The appraiser |
| Market Value? It is not magical at all; it is | | | | must know his/her city well and all the |
| a methodical series of analytical steps. | | | | socio-economic factors driving the market. |
| | | | This takes years of observation, study, and |
| First, the appraiser makes a physical | | | | considerable research by the appraiser. When |
| inspection of the property, determining size | | | | considering a professional appraisal, it is |
| of livable floor space and making note of all | | | | best to choose an appraiser who is certified |
| amenities, such as the number of bedrooms and | | | | and has any of the following professional |
| baths, the garage, washing facilities, | | | | designations: MAI (Member American Institute) |
| storage areas, and any special features such | | | | ASA (American Society of Appraisers) SRA |
| as a fireplace, pool, patio or outbuildings. | | | | (Society of Appraisers) CRA (Certified Real |
| After a through inspection, the appraiser has | | | | Estate Appraiser) IFAS (Independent Fee |
| a starting point to arrive at market value. | | | | Appraisal Society). This list is a few of the |
| With all the physical data collected, the | | | | most recognized professional appraisal |
| appraiser uses two or three methods to arrive | | | | organizations in America. |