Real Estate Appraisal - Do It Yourself

For single family homes, there are two basic methods used in real estate appraisal. They are replacement cost analysis, and using comparable sales. A third appraisal method, based on capitalization, is used for income properties, and is covered in another article.

In figuring replacement cost the question is: What would it cost to buy this land and put this house on it? If the land (improved) would cost $40,000, and the house could be built for $150,000, the value indicated would be around $190,000 - if the house is fairly new. If it has used up 10% of its useful life, you can deduct $15,000 for depreciation.

Replacement cost is not really a very useful measurement. It is difficult to say what the land is worth in a city center where none is left for sale, for example, and tough to gauge depreciation. It is used as a secondary method, and for unique homes that can't be compared easily with others. The primary method of real estate appraisal used for homes is a market analysis using comparable sales.

Real Estate Appraisal 101

To get a good idea of what a home should sell for, you need to compare it to homes that have sold. Find at least three similar homes in the same area that have sold within the last year, preferably within the last six months. This information is available in the county records, or from a real estate agent with access to the MLS (multiple listing service).

Now the confusing part. You start with the selling price of each of your comparables. If your subject home has a second bathroom, and the a comparable doesn't, you add the value of the bathroom to the sales price of the comparable. If a comparable home has a blacktop driveway, and the subject home doesn't, you take the value away.

You are rectifying differences, to see what comparable homes would have sold for if they were like yours. So if a comparable sold for $140,000, and a bathroom is worth $15,000 in your area (ask a real estate agent for help with these figures), you ADD $15,000 for the bathroom it doesn't have. Then you subtract, say $4,000, for the paved driveway it does have. This gives you a comparable sales price of $151,000.

You do this with all differences between the subject home and each comparable. When done, you average the three comparable prices. So if the three comparables have adjusted sales prices of $151,000, 162,000, and 149,000, you add the three figures and divide by three. The indicated value of the home is $154,000.

Of course all appraisal is an inexact science. If you can only find comparables sold over a year ago, you have to estimate appreciation in the area. If one sold with seller financing, you have to decide how this affected the price. For all of it's flaws, however, for single family homes, this is the most accurate method of real estate appraisal.

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

In The News:


pen paper and inkwell


cat break through


Small Town Stone House with a Long History

As a native Midwesterner, the first thing I noticed when... Read More

Why Selling on Lease Options is Glorified Landlording

I might upset some folks with this one, but that's... Read More

Real Estate: Choose a Realtor You Can Trust

Today's volatile real estate market involves complex laws and fluctuating... Read More

Kings Bay Georgia Real Estate - Be Picky When You Choose your Realtor!

I have been a mortgage lender for many years and... Read More

8 Essential Questions to Ask Your Home Inspector

Congratulations! You've decided to purchase a home. We all know... Read More

A $100,000+ Discount On Miami Condos

By this point and time, many people have heard about... Read More

Budgeting Your Log Home - Creating a Checklist

If you've read my first article, BUDGETING YOUR LOG HOME:... Read More

Tenants in Common (TIC)

Tenants in Common is a way of sharing ownership of... Read More

Don?t Just be a Real Estate Agent, be a Professional!

Buyer Broker Agreement? What's that? Most agents don't ask their... Read More

What is a Predatory Lender?

Several months ago, the 3,000-member California Association of Mortgage Brokers... Read More

What We Do To Sell Your Property!

Once you have contracted us to sell your property we... Read More

11 Steps Away From Buying a Home

There is no doubt that the market for houses has... Read More

Escrow From a California Homeowners Perspective

The Escrow ProcessBoth Buyer and Seller deserve the assurance that... Read More

Preparing for a Showing

As soon as you decide to put your home on... Read More

Choosing An Estate Agent

With so many estate agencies vying for your business, choosing... Read More

Much Ado About Mansionization?

Is there a perpetual shadow hovering over your house? Do... Read More

Popping The Real Estate Bubble Myth!

If you turn on the TV, listen to the radio,... Read More

Boston Real Estate ? You Still Have Considerable Control Over the Sale of Your Boston Home

Boston real estate is a hot topic. Daily newspaper articles... Read More

Business Credit Card Dirty Tricks

My system teaches people that the proper use of credit... Read More

Home Equity ? Don?t Spend It on Risky Investments

The housing market has exploded in the last five years,... Read More

Curb Appeal

First, lets start with what it is. Curb appeal is... Read More

Real Estate Disputes And Partition

What if two people pooled their resources and began investing... Read More

Five Ps of Selling Houses

1. Planning:Know Your Target BuyersThink about your neighborhood and the... Read More

Rehab Your Way to Wealth: The Quick Way to Fixer-Upper Success

Completely rebuilding a house is not necessary to make money... Read More

Stopping Home Foreclosure with Bankruptcy

Bankruptcy Will Stop Your Sale - At Least For Now... Read More

Types Of Real Estate - An Investors Choice

There are different types of real estate, and different ways... Read More

Planning for Real Estate with Estate Planning

One of the most important considerations you will need to... Read More

Why Mobile Homes?

There are mobile homes for sale, for much less than... Read More

How to Calculate Real Estate Rehab Profits

If you are investing in real estate you will face... Read More

Bubble, Bubble, Toil and Trouble?

We are selling our house. We have lived here for... Read More

How To Find Your Dream Home In Belize

Shopping for property in Belize is not as simple an... Read More

Juggling The Day With A Deal

Doing deals with sellers is why you went into lease... Read More

Beat the Crowd when Investing in Real Estate

We all are thinking about it and some of us... Read More