Appraisals - How Much Is It Worth?

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Appraisals - How Much Is It Worth?

     How much is this home/property worth?
     How do you find out what your property is worth?
     Should you order an appraisal before putting on the market?
     Why do some homes sell faster than others?
     What home/property improvements provide better return?
     What is the MLS and how can it help?
     What items must be disclosed about property?
     Must the Seller disclose the terms of other offers?

How Much Is It Worth?

A home or property is essentially worth what someone is willing to pay for it. However, there are more dynamics at work in the market value determination of a property. There are two manners in which a property's value may be estimated. Most rely upon an appraisal or a comparative market analysis. An appraisal is a certified appraiser's estimate of the value of a home at a given point in time. Appraisers consider square footage, construction quality, design, floor plan, neighborhood and availability of transportation, shopping and schools and recent comparative sells. Appraisers also take lot size, topography, view and landscaping into account. Most appraisals cost about \$300. A comparative market analysis is a real estate broker's or agent's informal estimate of a home's market value, based on sales of comparable homes in a neighborhood, market trends, lending rates, supply and demand, and many of the factors that appraisers base their estimates. Most agents will give you a comparative market analysis for free.
Before settling upon either the appraiser's estimate or agent's comparative market analysis, make sure you are comfortable with this estimate. Either estimate can be proven faulty in my own experiences and different appraisers may arrive at totally different estimates as may different realestate agents.

How do you find how much it's worth?

First: investigate area home selling trends. Check with a real estate agent to determine the current selling price of homes in your area. Real estate firms generally run recent sale comps via MLS in the surrounding areas. Or You can do your own comparisons by looking up recent sales of comparable properties in public records. These records are available at local recorder or assessor offices, through private real estate information companies or on the Internet.

Also, pay attention to "migration" patterns to determine if people (and businesses) are moving in or out of the area. One of the best ways to track movement is to read the business section of the local newspaper or talk to the Chamber of Commerce. If there is a lot of movement into the community, chances are home prices will be going up at a relatively rapid rate. Obviously, if there is heavy migration out, prices will be flat or could even drop.

Keep in mind that two side-by-side homes can command radically different prices as well as across the street. Part of the reason can be attributed to certain features that may enhance the value of the home in the buyer's eyes. For instance, older homes that have been upgraded with new fixtures, windows, room additions or upgrades command higher prices than homes that remain unchanged. In many cases, with minimal expenditure, these price-enhancing features can be added and sellers can often increase the property's value by thousands of dollars. Unchangeable elements such as lot size, proximity to corner or busy intersections, or single story versus two-story can also impact the value of adjoining homes.

Perhaps one of the most critical elements in selling a home, is pricing. By carefully following the local real estate market, or contacting a real estate professional, not only can sellers determine the right time to sell but, most importantly, they can also ascertain the correct price to list the property to get it sold.

Should you order an appraisal?

An appraisal will give a good indication of the price the seller will actually get for their property, but it isn't necessary. A real estate agent can give you similar reliable data to determine current market value. To determine the asking price, a seller's representative will look at the comparable homes in the area have recently been sold.

The appraisal process used by a licensed appraiser is more theoretical than a market analysis provided by an agent and doesn't predict what a buyer will be willing to pay. Therefore, appraisals are rarely needed by buyers or sellers, however, appraisals are normally required by lenders who are considering making a loan to prospective buyers. In contrast, sellers of more expensive or custom homes may get appraisals, because there may not be any homes in the area which to compare. Buyers of these unique homes will also have more confidence in an asking price that is supported by an appraisal.

Before determining an asking price, sellers should give their agent a list of major improvements done to the home, such as a new roof or upgraded heating system or those repairs, improvements that may still be needed. This will help the agent consider all the factors when recommending a market price. It will also put him or her in a better position to sell the house and its features for the best listing price.

Why do some homes sell faster than others?

Usually because the price is right. Pricing is usually the number one factor as to how short or how long a home will be on the market. Obviously, the property has to be priced competitively, but not based on prices family, friends or neighbors received or paid for their home/property. Many a well meaning buyers have been refused a contract for insulting the seller(s) with a low offer at the advice of those previously mentioned. Just as well, many a seller have not sold their property due to setting too high a listing price on their home because of sentimental value or other human factor.

The asking price must be close to market value--no more than 5 percent above the current market value. If the home is overpriced by more than 5 percent, few buyers will inspect your home or make a purchase offer. Most realty agents will avoid showing overpriced homes to their prospective buyers because they would rather show homes offered by motivated sellers who realistically price their homes at, or even slightly below, market value. Nationwide, homes sell for about 96 percent of the asking price. Don't price your home out of the market!

Therefore, in determining the right price, one of the most important traits you need is objectivity. Despite the attachment, try to be practical and logical. Evaluate price per square foot, age, condition, location, schools, and extras.

Consider also, that the value of your home can be impacted by developments that are not yet in place. If there is vacant land, visit the local planning and zoning commissions to see what might be built or, check with a local real estate professional to help you find out what development plans might be in the future. He or she should also explain the particular elements that go into pricing.

Remember, too, that little things can make a big difference once the home has been priced. Cosmetics are crucial. Spruce up the property as much as possible. A little exterior paint, a light and bright interior, some new shrubbery, and making sure that the house is always neat and clean can make a word of difference. A first impression is a lasting impression and often that lies in the the exterior. Leave the buyers with that good impression.

Another almost equal possiblity for a property not selling may lie in the real estate agent selected to list the home for sale. Some agents are great agents. Others are not as intuitive or motivated. Some agent/seller relationships may be lacking. Attempt to choose an agent who possesses a good success record selling listings and one who is knowledgeable, has a sense of repoire, fits in with the community and has a reputation for meaningful negoatiating and gets the job done!

Finally, Never sign a listing for longer than 90 days -unless the listing agent includes a written clause allowing you to cancel the listing after 90 days without specifying any reason. A 90-day listing clause is the best way to assure your agent will work hard, smart, and fast to get your listing sold.

What home/property improvements provide better return?

Most homeowners invest time, work and money into their property before putting it on the market. Many, however, don't recover that investment in the sale of their home because they either put their dollars into the wrong upgrades or over-improve the property for its location. It is proven true that although more expensive upgrades such as kitchen, bath may add more value to the home, it also involves more out-of-pocket expense and the return may take longer due to already close market values for the home prior to major improvements.

It's the little things that help homeowners yield top dollar and improve the salability of their home. And many of these are do-it-yourself projects. A new survey of more than 2,000 real estate agents from across the country found many smaller improvements can help. The survey, conducted by HomeGain, found improvements ranging from \$100 to $700 actually provided a greater return on investment than did major projects.

Improvement	Typical Cost	Increase in Sale Price	Average Return in %	% of Agents Who Recommend the Improvement
Lighten and brighten	\$86-$110	$768-$935	769%	84%
Clean & de-clutter	\$305-$339	$2,093-$2,378	594%	91%
Fix plumbing, electrical	\$338-$381	$922-$1,208	196%	63%
Landscape & trim	\$432-$506	$1,594-$1,839	266%	72%
Staging	\$812-$1,089	$2,275-$2,871	169%	76%
Paint Interior Walls	\$1,453-$1,588	$2,342-$2,600	63%	69%
Kitchen, bath upgrades	\$1,546-$2,120	$3,823-$$4,885	138%	83%
Repair flooring	\$1,531-$1,714	$2,267-$2,589	50%	%62
Paint exterior walls	\$2,188-$2,381	$2,907-$3,233	34%	57%
Replace carpeting	\$2,602-$2,765	$3,585-$3,900	39%	65%

          [Typical home characteristics for U.S. agents responding: 3 bedroom, 2 bath, 1,892 square feet, sale price of \$201,796. (May 2000.)]

     What is the MSL and how can it help?

          MLS stands for "Multiple Listing Service," which today is a computerized database of virtually all the homes that are for sale in a specific area. When a Realtor lists your property for sale or to use the MLS for a prospective buyer, they pay a fee which is often included in their licensing fees. The big advantage to sellers is that the MLS is the #1 resource used by buyers (and agents) to locate homes. Properties that are not found in the MLS (usually those being sold by their owners) will not be exposed to the many buyers and Realtors.
          The MLS has become such a standard in real estate that no serious broker would think of trying to sell real estate without it. It would be like an accountant trying to work without a calculator. The only realtors who may not use the MLS are those who deal with foreclosures, high-end or specialized properties. The MLS provides a surprising amount of detail, depending upon the area of the country it may include the location (by zip code); size of the home (square footage); size of the lot; number of bedrooms and bathrooms; extra rooms such as a den, family room, formal dining room, or enclosed patio; amenities such as a backyard, fireplace, hot tub, pool, kitchen features, new carpet and drapes; capacity of garage; age of home; and of course, the selling price, terms and perhaps disclosures.
          Realtors can narrow their buyers' searches dramatically by using the MLS. For instance, their realtor can run a computer search and return listings of all homes within a certain location and price range with a particular number of bedrooms, baths, and other desired details. Not only will this request generate a brief list of viable possibilities, it also helps buyers gauge, roughly, what they can expect to get for their money, financing, and to compare the value of the homes listed. Thus, the MLS is more than a system that lists properties. It's an aid to both buyers and sellers, and is a definite asset to consumers when it comes to real estate.

     What items must be disclosed about property?

          In most states, it is the seller's obligation to disclose information about a property. Under the strictest laws, you and your agent, if you have one, are required to disclose all facts materially affecting the value or desirability of the property which are known or accessible only to you. This might include: homeowners association dues; whether or not work done on the house meets local building codes and permits requirements; the presence of any neighborhood nuisances or noises which a prospective buyer might not notice; any sudden or "tragic" death within three years on the property (this varies state to state); and any restrictions on the use of the property, such as zoning ordinances or association rules. Anything which could adversely and significantly affect the ordinary purchaser's use or enjoyment of the property or any intended use of the property.
          The most common question arising under this provision is what constitutes a 'material fact' which must be disclosed. There are certain facts, which are clearly material and must be disclosed. These include while not omitting others: wet basements or the presence of lead-based paint. Between the extremes of facts that must be disclosed are varieties of facts that are open to interpretation. Basically, put yourself in the others shoes! Ask yourself whether this is a material fact you would want to know before purchasing this home.
          If you as a seller are moving because the airport noise, or a Super Wal-mart store is going up next door then this would suggest strongly that it is a material fact. If the fact deals with a disposal dump, juvenile home, etc. that is 'off site', then the proximity bears on its materiality. If it is not in close proximity then it is probably not a material fact. Materiality can be difficult to define and therefore must be analyzed in light of the unique circumstances of each case. Finally, it is extremely important that a seller's disclosure be completely filled out.

     Must the Seller disclose the terms of other offers?

          Sellers and their representatives are not legally obligated to disclose the terms of other offers to prospective buyers. In most cases, this would not be advantageous to either the seller or representative and in many cases could be considered by realestate boards governing agents licenses, a question of ethics.

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