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Real Estate Appraisals - Explained

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Real Estate Appraisals - Explained Powered By Docstoc
					If you are selling your home with OR without a real estate agent you should get an
appraisal before you decide on the selling price. An agent's market analysis will get
you in the ballpark, but do you really want to stumble around in the dark with your
hard earned equity? I remember a retired couple that set their selling price based on
the agent's analysis. Their home sold in three days! When the appraisal came in it was
$20,000 above the selling price. That was a terrible shame but it can be just as bad if
you price it too high and it just sits on the market. An upfront appraisal will protect
your equity and be well worth the cost.

Having an idea about what is involved in appraising a piece of property can greatly
help in maximizing the appraised value. The following major steps are in the
sequence normally followed by appraisers:

1. Research the subject property as to size, bedrooms, baths, year built, lot size and
square footage.

2. Gather data of recent sales in the neighborhood. The appraiser needs to locate at
least 3 similar-sized homes that have sold in the neighborhood with in the last six
months. The homes also need to be within one mile of the subject property. These
homes are called the "Comparable Properties" or "Comps" for short.

3. The field inspection consists of two parts: a complete inspection of the subject
property, and the exterior inspection of the comparable properties.

The subject property inspection consists of taking photos of the street scene, front of
the home and rear of the home, which may include portions of the yard. The appraiser
will make an interior inspection for condition, noting any items that would detract
from or add to the value of your home. He will also draw a floor plan of the home
while doing the inspection.

The inspection of the comparable properties is limited to an exterior inspection. For
features that cannot be seen from the street, the appraiser uses: reports from Multiple
Listing Services (MLS), California Market Data Cooperative (CMDC), county public
records, and appraisal files to help determine the condition.

4. After the field inspection has been completed, the appraiser must determine which
comparable properties most resemble the subject. Then he/she makes slight
adjustments in value for any differences. After making the required adjustments, the
appraiser must go through a reconciliation process with the three comparable
properties to determine a final estimated value of the subject property. This method is
called the "Direct Sales Comparison Approach to Value", and it accounts for nearly all
of the considerations in determining value of a single-family property.

It is important to remember that the appraiser will be taking photos of the street scene
and the front and back of the home. The street scene gives the lenders some kind of
idea as to the type of neighborhood in which the home is located. The photo of the
front of the home gives the lender an idea of its condition and its curb appeal. Lastly,
the photo of the back of the home and part of the rear yard is another indicator to the
lender of the home's care and maintenance.

In most cases, (over 90% of the time) what you see in the condition of an exterior
home will be repeated almost exactly in the interior. So one of the most important
things you can do to enhance the value or perceived value is to improve the curb
appeal of your home, ... and don't forget to clean up the back yard.

An appraiser will call in advance to set up an appointment to inspect your home. At
that time offer to supply any information about the home size, number of bedrooms,
bathrooms, pool, enclosed patio, etc. The more that is known about the property prior
to inspection, the better the appraiser can focus on researching the most similar
comparable. Doing your homework will maximize your chances of having a good
appraisal.

While your home is being inspected don't follow the appraiser from room to room
causing distraction. Instead, allow the inspection to go smoothly. In case the appraiser
has any questions, be close by to answer them. The time to mention the things you
think are important is either before or just after the inspection.

In conclusion, the best thing you can do to increase the perceived value of your home
is to get it ready before the appraisal. Clean it, put fresh paint where needed, and clear
the clutter inside and out. You should also make any minor repairs needed and be sure
to manicure the front and back yards!