Determination of Value for Your Home
An appraisal is an opinion of value, an estimate of worth. The Federal National Mortgage (FNMA) states, "Market value is the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale,(whereby) the buyer and seller, each (are) acting prudently, knowledgeable and assuming the price is not affected by undue stimulus."
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The value of residential real estate is estimated by comparing the subject with similar properties that have been sold recently. Look at your neighborhood to find comparable sales or properties in similar neighborhoods that share similar characteristics of lifestyles, income level of residents, surroundings, average age and value of house.Neighborhoods:
Neighborhoods have boundaries and barriers to the best neighborhood which may signal an abrupt change in lifestyle i.e. railroad tracks, freeways, highways, major traffic arteries, lakes, rivers, mountains, etc. There are political boundaries created for government purposes, such as school districts, assessment districts, zoning districts and city limits. In your neighborhood analysis, you may consider recreational facilities common to your situation. The focus is to find comparable homes in similar neighborhoods for your analysis.
The best way for determining the price to set for a given property is to base that estimation on the fair market value comparison. The fair market value comparison approach uses the principle of substitution. That principle states that the maximum value of your house and property tends to be set by the sales price of an equivalent, equally desirable, similar substitute house and property, for a certain day in time. Find 3 or more homes that sold recently having amenities and characteristics similar to yours.
Because properties are seldom alike, it will be necessary to make adjustments between the comparable properties as compared to the subject property (your property). This process equalizes the properties in the comparison. A good definition according to a leading appraiser, Ventolo and Williams, states that an adjustment is a "decrease or increase in the sales price of a comparable property to account for a feature that the property has or does not have in comparison to the subject property."In other words, the comparable properties are adjusted to reflect the value of the subject property. You never adjust the subject (your own home). If two houses were identical in every way except that the subject (your house) had a deck and the comparable did not, the value of the comparable would be adjusted upward.
By this method, the subject (your house) reflects more value when compared to a comparable house with deficient items (such as no deck or no garage). Always remember: comparable sales must be adjusted and not the subject property. The Federal National Mortgage Association (FNMA) puts it this way: "The subject property is the standard against which the comparable sales are evaluated and adjusted. Thus, if an item in the comparable property is superior to that in the subject property, a minus (-) adjustment is required to make that item equal to that in the subject property.
Conversely, if an item in the comparable property is inferior to that in the subject property, a plus (+) adjustment is required to make that item equal to that in the subject property. In other words, if a comparable sale property has a major improvement that your property does not have, make a minus adjustment. On the other hand, if you enjoy a major improvement and the comparative sale property does not, make a positive adjustment. Round off adjustments to the nearest $100.
There are four basic phases involved in this approach:
- Recording and analyzing data from your property and potential comparable properties
- Selecting the appropriate comparable data
- Developing reasonable adjustments based on market data
- Applying your findings to the subject (your property)
Concentrate on finding comparable sales that have characteristics similar to those of your own home. A variety of these parameters are listed below in descending rank of importance, the first listed being more important than the last listed.
Categories of Compatibility:
- similar neighborhood
- total square feet of living space
- number of rooms, bedrooms, baths
- sold preferably within 4 months
- sales price within general market price of your home
- sales or financing concessions
- quality of construction
- style of house
- age of house
- square footage
- property site and view
- functional utility (deficiencies or overbuilt features)
- number of garages
- swimming pool, fireplace(s), remodeled kitchen, kitchen equipment, etc.
- storm windows or replacement window or thermopane windows
- basement i.e. finished, unfinished or none
- deck, patio, porch, etc.
- landscapingIf you don't want to do it yourself, spending $120 to $300 for a qualified appraiser to determine the current value for your home and around $200 to $700 for his/her time in court will get the job done. If you also want to hire an attorney to speak up for you (usually 5 - 10 minutes of speaking time) that will cost upward of $500.
Finding a "appraisal" offered free of charge by real estate professionals. It's not a bona fide, time-consuming appraisal, but rather a "ball park figure." They refer to it as a comprehensive market analysis (CMA). These CMA's don't stand up well under scrutiny since they rarely have clarity by way of a format that is accepted by the municipal authorities.
Or, you can do it yourself. No one better qualified than yourself on issues of your own neighborhood. You have lived there for years, have traveled the streets and compared other neighborhoods to your own, scrutinized improvements and detractions, seen or attended "open houses" hosted by real estate agents, witnessed comparable properties that were bought and sold.
If you are going to appeal you will need to analyze and review comparable houses that sold in the last year listed in the Multiple Listing Service "sold" directory. Generally, in a half hour you'll be in and out of their office. Real estate agents are happy to share this information with you . They hope the bond established with you well be remembered when it comes time to sell your home.
You can have a reliable expert at your side using the full sized 81/2 x 12 inch 148 page book "Property Tax Appeals: How to Win Your Case, How to Determine the Market Value of Residential Property". By using the market value approach to value your house you can accurately determine the value of your house. The only contentious issue should be the value of an individual adjustment and you'll have those figures nailed down with our help. Purchase this remarkable book now. Property taxes home page
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