Essential Tips for Real (Real Estate Appraisal) Estate 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.

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

Homeowners Appealing Property Values – (Real Estate Appraisal) MyFox Atlanta

Homeowners Appealing Property Values – MyFox Atlanta
ATLANTA – Many Georgia homeowners have taken a step this year toward appealing their property values in hopes that the historic drop in real estate prices will be reflected in their county’s appraisal of home property. The Atlanta Journal

Charlotte Real Estate Listings and Charlotte Home – PRLog (free press release)
Chapter of The Appraisal Institute, to hear his insights into the local market. When I started writing about commercial real estate last year, I asked developers and brokers who they look to for advice. Stout’s name came up often. Stout works out of

Scott property values top $1B; Lee numbers up 14.6 – Kingsport Times-News
During a Lee County Board of Supervisors meeting last week, Matt Tumlin, president of Commonwealth Real Estate Appraisal Group the firm that conducted Lee County s reassessment said the amount a property increased could be higher or lower

Donald Trump’s Real Estate Tycoon (Real Estate Appraisal)

Donald Trump’s Real Estate Tycoon Customer Review: Where did the tutorials go?
I played the game through all levels of the tutorials and advanced to ‘one-on-one’ with D. Trump… I did okay. Then I didn’t play the game for while and when I went to play it again and get a refresher from the tutorials they were “GONE”! Now the game will not play at all…… No help from the ‘Website’ either.. That is just an order site only. So I would not buy this again.