Essential Tips for Real Estate (Real Estate Appraisal) Appraisals

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When you have the perfect home picked out and you know this is the home you want, your lender will require you to have an appraisal upon the request to use the home as security for a loan. A real estate appraisal will help in establishing a property’s market value, the sales price it would probably bring the seller, if offered in an open and competitive real estate market.

The reason the lender requires the real estate appraisal is because they want to ensure that the property would sell for at least the amount of money you require for your loan. Simply put, if the lender should ever have to foreclose, they want to ensure they would be able to get their moneys worth.

A real estate appraisal is not to be confused with a comparative market analysis (CMA). Real estate agents commonly use a CMA as a tool to determine a realistic asking price for home sellers. Although, an experienced agent may come extremely close to an appraisal price with the CMA, an real estate appraisal’s report include a lot more detailed information, not to mention the fact that it is the only evaluation report a bank will accept when making the decision of whether or not to loan money.

When having a home appraised for this purpose you should have an appraiser that is an objective third party. The appraiser should have no financial or any other connection with either party involved. If you have never experienced a real estate appraisal before, here are a few things that are included in the report.

There will be many details about the property in question as well as side-by-side comparisons of three different properties like it. There will be an evaluation of the areas overall real estate market. Any issues an appraiser feels can be harmful to the value of the property. Notations about any serious flaws will also be made; these are all coupled with many other items on the detailed appraisal report.

Real estate appraisals come in two different methods for appraising homes. There is the sales comparison method where the market value is estimated by comparing the property to other similar properties that has been sold in the same area. This method uses the similar properties to make several estimates of what they would have sold for if they had the same feature as the property in question.

Then there is the cost method, this is generally used for new properties when the costs of building is known. In this method, the appraiser estimates the costs involved in replacement of the structure if it were to be destroyed.

It is important to note that you should not depend on an appraisal to help you determine if the home is in satisfactory condition. This is a job for a home inspector. During a real estate appraisal, the appraise may take notes about obvious issues, however they will not test appliances, inspect the chimney or roof.

About the Author

Rory H. Hawkins writes about real estate appraisal and other interesting topics. For more information on real estate appraisals visit us today.

Operating Systems Home Inspection from A to Z – DVD – Real Estate Home Inspector, Homeowner, Home Buyer and Seller Survival Kit Series (Real Estate Appraisal)

Operating Systems Home Inspection from A to Z – DVD – Real Estate Home Inspector, Homeowner, Home Buyer and Seller Survival Kit Series Don’t let your dream house be a nightmare in disguise! Everything you need to know about Real Estate – from Asbestos to Zoning. This 5-star rated DVD has over an hour of video and as an added bonus you also get the 80 page HIB DVD Companion Guide e-Book. This DVD shows the precise steps to follow to inspect all of the OPERATING SYSTEMS of a home.

The OPERATING SYSTEMS DVD topics include: heating systems (gas, oil, steam, hot water, and hot air heating), air-conditioning, water heaters, plumbing, well water system, septic system, electrical system, gas service, and auxiliary systems. Health Concerns topics including: asbestos insulation, radon gas, and water testing.

The INTERIOR and EXTERIOR inspection topics are covered in our other DVD that can be purchased separately. The INTERIOR and EXTERIOR DVD topics include: roof, chimneys, siding, eaves, gutters, drainage and grading, windows, walkways, entrances and porches, driveways, walls and fences, patios and terraces, decks, swimming pools, exterior structures, wood destroying insects, garage, kitchen, bathrooms, floors and stairs, walls and ceilings, windows and doors, fireplaces, attics, ventilation, insulation, basement/lower level, water penetration.

This is definitely the best home inspection DVD series on the market! Created by Guy Cozzi who is a licensed appraiser, home inspector, consultant, and real estate investor. This top selling author has been quoted as a real estate expert by the New York Times and many other publications. He has been a guest speaker on real estate investment TV shows for years. Guy Cozzi has taught thousands of people how to inspect, appraise and invest in real estate and provides advice to many banks and mortgage lenders.
Customer Review: Excellent DVD! We use this to train our home inspectors.
I own a very successful home inspection business in California. We use all of this authors products to train my staff since they are the by far the best products for real estate training on the market. We originally found out about these products through excellent book reviews in the local real estate publications. From that we learned the following details and decided to purchase the whole “Real Estate From A to Z” series by this author:

Nemmar Real Estate Training is ranked as the most exclusive real estate appraiser training, home inspector training, and real estate investor consulting service since 1988. Our real estate books, DVDs, CDs and Videos are rated number one in their real estate categories nationwide! Our products have taught thousands of home buyers, sellers, and real estate professionals worldwide. You too can learn everything you need to know about Real Estate – from Asbestos to Zoning. With this knowledge you will save thousands of dollars when you buy, sell, or renovate your home. You will also learn how to eliminate safety hazards and properly maintain a home. Statistics show an average savings of at least $4,700.00 per home for customers who have our books and DVD videos. Our real estate investment, home inspection, appraisal, and home improvement books have been called the “Bible” of the real estate industry. Written by Guy Cozzi, who has decades of experience as a licensed appraiser, home inspector, consultant, and real estate investor. This top selling author has been quoted as a real estate expert by the New York Times and many other publications. He has been a guest speaker on real estate investment TV shows and has taught thousands of people how to conduct home inspections, real estate appraisals, and how to invest in real estate. He also provides real estate advice to many banks and mortgage lenders.

Real Estate (Real Estate Appraisal) Valuation

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Real estate valuation for single family homes is typically done by using comparable sales. With income properties this just doesn’t work well. Imagine if you are looking at a 24-unit building. It would be difficult to find similar ones nearby that have recently sold.

It’s also not ideal to use replacement costs for income property appraisal. How do you figure replacement cost if there is no land for sale nearby with proper zoning? This is used as a secondary method, though, and can tell you if maybe you should be building instead of buying.

Real Estate Valuation By Cap Rate

Income properties are bought for the income. Income, then, is what is used to determine value. The rate of return investors in a given area expect gives you the capitalization rate, or “cap rate” for the area. This is what you use to accurately appraise an income property. Below is a somewhat simplified explanation.

The process begins with the gross income of a property. You then subtract all expenses, but not loan payments. For example, if a building’s gross income is $82,000 per year, and the expenses $30,000, you have a net (before debt-service) of $52,000. You then apply the capitalization rate to this figure.

Suppose the acceptable cap rate in the area is .10, for example (ask a real estate agent), meaning investors expect a return of 10% on the value of the property. You simply divide the income of $52,000 by .10. $520,000, then, is the indicated value of the building. Suppose the usual rate is .08, meaning investors in the area expect an 8% return. Then the value would be $650,000.

Easy Real Estate Valuation?

Take net income before debt-service, and divide by the “cap rate:” It’s a simple formula. However, the tough part is getting accurate income figures. Did the seller show you ALL the normal expenses? Did he and exagerate the income? Suppose he stopped repairs for a year, and also showed you the “projected” rents. In that case, the income figure could be $15,000 too high. The building would be worth $187,000 less (.08 cap rate) than your appraisal shows.

One thing smart investors do when buying, is to separate out income from vending machines and laundry machines. If these provided $6,000 of the income, that income would add $75,000 to the appraised value (.08 cap rate). Instead, do the appraisal without this income included, then add back the replacement cost of the machines (probably much less than $75,000) to arrive at a valuation.

Of course, you should be careful with any real estate appraisal method. There is no perfect appraisal method, and all are only as good as the figures you plug into them. If used wisely, though, appraisal by capitalization rates is one of the most accurate methods of real estate valuation.

About the Author

Steve Gillman has invested in real estate for years. To learn more, get a free real estate investing course, and see a photo of a beautiful house he and his wife bought for $17,500, visit http://www.HousesUnderFiftyThousand.com

Online Press Release (Real Estate Appraisal)

Online Press Release
PRWeb – Tampa Bay Realtor Featured In duPont Registry’s Distinctive Realtor Registry A select few Realtors make this highly selective list of those who specialize in selling the finest luxury and waterfront real estate in existence. – 2006-07-06 She Is Blonde

Houses For Sale –
Kingsport Times-News – Priced $20,000 below appraisal; $275,000. Shown by appointment only, Call Bill Lizzio, (423) 791-0191 or 282-6819, owner All Real Estate advertising in this newspaper is subject to the Fair Housing Act which makes it illegal to advertise “any