Understanding How Your Property Is Appraised is critical to purchasing real estate. If you are not familiar with how your property is valued, then you may be blindsided when a potential buyer offers a great price. You may not realize that there are several other variables that go into determining the value of your property. If you take the time to understand how your property is appraised, you will know what to expect when a new buyer makes an offer.
How your property is appraised depends on how it has been appraised in the past. Each county now has its own independent appraisers, who usually determine the property values using a variety of different considerations. The local government may hire a professional appraiser, such as a tax assessor or the county office of real estate, or they may assign an appraiser to perform the appraisal without any input from the local government.
The property value is determined by a number of factors. Your local county and state Board of Equalization are responsible for licensing appraisers. The state Board of Equalization only licenses an appraiser who passes the county-approved exam. Appellate courts usually appoint appraisers who have been thoroughly trained in real estate appraisal principles and methods.
How Your Property Is Appraised
The appraiser's calculation of the market value involves more than just adding together the total amount of the repairs and improvements. It also takes into account the type of dwelling, like single detached dwelling or multi-unit dwelling, as well as the lot area. In addition, a market value determination does not just include current construction costs; it also takes into account the cost of demolishing and rebuilding the property if it needs to be sold. This is one reason why it is important for you as the home buyer to get an appraisal, before making any agreements with a real estate agent.
While there are no strict national laws about how your property is appraised, states do have their own method of setting the standard for market value. Most states use a "market value" formula that is based on a percentage of the sales of similar homes in the area. Some states allow home builders to submit their own formulas or choose to do so under their own regulations. Your local assessor will usually base the market value on a comparable sales listing.
Market value standards for most states also consider historical sales and new construction sales when determining the appraised market value of your home. For example, sales comparison approach involves looking at recent sales of similar homes in the area to the one being appraised. If the sales comparison indicates that your home is significantly higher or lower than the average, then it is used as the basis for the market price. This is why market comparison is a key factor in your property's appraisal; it helps to eliminate the possibility of a property being over-estimated or underrated.
Another way to determine how your property is appraised is to use the number of days the agent has owned the house since it was appraised. If the agent has only held the property for a few days, it is much more likely that the agent will make errors on the appraisal. The number of days that the agent has owned a property also affects the commission that is earned from the sale of the house. The longer that an agent has owned a home, the higher the commission that is earned on the sale. So, it is wise to choose an appraiser with many years of experience before purchasing a home.
How your property is appraised is important to you because it helps to keep you financially protected. You want to know how much money you will be able to get when you sell a house, but it is even more important to know what the value of the house actually is. Many homeowners do not fully understand the concepts of fair market value and what it means when they are presented with a property's appraisal certificate. When this happens, many sellers are willing to sell their homes for less than the appraisal certificate actually indicates. Therefore, it is important to use an experienced real estate appraiser who can explain how the appraisal process works.
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