What is a property appraisal ?
Property appraisal is the process of assigning a value to a property for the different purposes . The first step in appraising is to determine a property ’ s fair market value .
The method to calculate the fair market value can be performed using one or more of the following three approaches :
The Sales Comparison Approach involves the analysis of recent sale prices of similar properties to determine the most probable price that a property would sell for on the open market between a willing buyer and seller . Typically , this method involves selecting properties with similar characteristics in the same market area that have been recently sold , once those properties are found they are compared to the property in question . This approach is the most familiar one as it is the accepted method for valuing any real estate . It is best suited to types of property that sell frequently ( e . g ., residential ).
The Income Approach
This may be used when there is insufficient sales data available and the property is income producing . This valuation approach is a shorthand means for real estate investors to determine the value of a property based on its income in comparison to similar properties .
Essentially , if we know what the capitalization rates are in a given market for that type of property , we can divide the income generated by the property by the capitalization rate and come up with a sales value as a result . It is often used to appraise properties such as retail buildings , hotels , apartment buildings or rental office buildings .
The Cost Approach :
This approach is useful when the property being appraised is a type of property that is not frequently sold and is not an income producing property , or there is a limited amount of sales or rental information available , or when the property is a special use property .
The cost approach makes the assumption that a reasonable buyer would not pay more for an existing property than it would cost to buy a comparable land plot and construct a building that is also comparable in terms of desirability and usefulness .
It requires the appraiser to calculate the fair market value of the land using the sales comparison approach and then add the construction of the building . The last step requires the appraiser to subtract an amount that reflects the existing deterioration ( depreciation ) of the current buildings and structures .
The most common problems you find in buying a resale property and how to avoid them
1- Write your vision of your new home .
Your vision of your home is not that simple , but some statements describing the desired state of your life after you buy your new home , all elements of your life , including where , how and how much you live , work , play and rest , etc .
2- Buy what you need , not what you want .
Look at the current house that you are already living in , it will help you to understand what you have been missing and what you need in your next home . Make a list of those needs and then start to shop based on those needs .
3- Set a realistic budget before you decide to buy a house .
You should sit down and make a monthly budget of what you spend every month , come up with a number that you are comfortable spending on your installment or mortgage payment , aside from those other expenditures . An easy way to do this is to take a third of your gross income and have that figure be the number you spend on the house installment or mortgage payment .
4- Research the neighborhood .
It ’ s absolutely critical that you research the neighborhood before you buy , check out the area , amenities , the schools , the clubs , the hospitals etc ., to be sure that your address corresponds with the correct district . You ’ re not just buying a house , you ’ re buying a piece of that real estate and the neighborhood around it .
5- Find a good real estate agent , and why you need one .
It ’ s about better access and more convenience . A real-estate agent ’ s fulltime job is to act as a liaison between buyers and sellers . This means that he or she will have easy access to all other properties listed by other agents and will know what needs to be done to put a deal together .
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