The Quick and Easy Guide to Real Estate Appraisal - How Much is Your House Worth?
Determining What Your Property is Worth
Having renovated and flipped several houses over the past several years, I learned some very quick and easy techniques for determining the value of any particular piece of real estate. Fundamentally, real estate appraisals are simply a determination of a particular properties value as compared to the area in which it resides. This comparative technique is far and away the most common methodology used by professional real estate investors. They simply compare one property against similar properties that are in close proximity while matching as closely as possible the attributes of the subject property to those of the comparable properties (comps).
This may sound a bit daunting, but in practice, it is really quite easy to develop a solid valuation before you spend any money for an appraiser. Your first step is to determine the specifics of your subject property. For our purposes, we will assume your subject property is a single family home. You will need to determine the square footage of the property, the number of bed rooms and baths, and the size of the lot. From there, you will want to add any special features or lack thereof. For example, does the property have a garage or a walk in basement? With this baseline data in hand, you are ready to begin valuing the property.
Most cities now post real estate transactions on-line, but from my experience the single best resource for covering nearly all areas of the country is a website call Zillow. Since it works so well, we will be using zillow.com for our exercise. Once you reach Zillow, you will simply type the address of the subject property into the address search line at Zillow. With that, you will immediately be provided with a Zillow appraisal based on the Zillow algorithm. It will also provide a range of values along with some trending information to let you know the property's value trending. This is good information, but it will not give you a true value. Now that you have all of Zillow's information on your subject property, you are ready to dive in a bit deeper.
Zillow will also provide you with a window that shows similar sales near your subject property. You will want to click through that link to find an expanded list of properties that recently sold in the area. With that expanded list, you need to pay close attention to the most recent sales, and the average sales price per square foot. Take several examples of recent sales and eliminate any outliers whether they are much higher or much lower that the mean. With those properties eliminated, you will then want to calculate a sales price per square foot for those properties along with the average square footage of those properties. Take that average and apply it to the square footage for your property.
That calculation will provide you with your baseline appraisal. From there, you will want to adjust based on the attributes of your property. For example, if your property is in good shape compared to the comparable properties, you would begin to move you price per square foot up. Further, if you property is smaller than the average of the comparable properties, you would again take the value per foot up. Conversely, if your property is larger than average, you would adjust downward a bit. Always pay attention to the list of comparables to help in matching your property against the similarly situated recent sales. Finally, add or subtract value based on the unique features of your property. Extra bedrooms carry a premium as does a garage if garages are unusual versus the comparative properties.
With these variables represented, you should now have a pretty good idea of the value of the property. Good luck and I hope you find that your property proves more valuable than you anticipated.