Posted by Richard on November 18, 1998 at 21:27:27:
Re: FMV…one of the mistakes I’ve made when getting
comps is to only look at the list of houses the agent
gave me. The MLS only has info on ‘listed’ homes.
Go to the public record and look at ALL THE SALES.
You will see a different average per sq. ft.
Establishing real estate value - Posted by Warren
Posted by Warren on November 17, 1998 at 12:36:40:
I am looking at a property that is appraised at $305,000.
However the properies comparable sale analysis done
by my realtor gives the property a value of $249,000.
In a situation like this how do you establish the properties
value.
Appraiser’s Reply - Posted by Paul
Posted by Paul on November 18, 1998 at 21:24:44:
An appraisal is an “opinion” of value and does not “establish” value. Three competent appraisers, using the same assumptions, will come up with three different values, but the range should be vary narrow. First, you need to know the reason for the appraisal you mentioned and you need to know the assumptions that were made in the appraisal (ie pertaining to lease renewals or completion of renovations, etc). Don’t just go by someone saying “the property appraised at $xxx.” It could just be the assessed value, which is meaningless, as they are typically based on mass appraisal techniques that are not accurate. Generally, I would tend to lean toward a professional certified appraiser’s value, as opposed to a Realtor’s competitive market analysis. The quality of any appraisal is based on how well the number is supported by market data, the appraiser’s experience appraising similar properties, and how well the appraiser knows the market. The cheapest way for you to get a rough idea of value would be to talk with a few other appraisers and ask them what similar properties are selling for on a price per sq. ft. basis, per unit basis or per room basis. Also ask what a typical cap rate would be (then divide your property’s NOI by the range of cap rates they may give) and ask what a typical gross income multiplier might be (then multiply your annual income by the range of multipliers they give). Good luck.
Re: Establishing real estate value - Posted by Eduardo (OR)
Posted by Eduardo (OR) on November 17, 1998 at 13:54:57:
Warren–
Sometimes sellers and others say, as you have, that the property is “appraised” at a certain value without giving further information. When I hear a seller say that, I ask to see the appraisal. Sometimes there is an appraisal by an independent licensed fee appraiser. Then you ascertain the purpose of the appraisal to give you an idea of what’s going on. More often than not, however, when a seller says there is an appraisal, he means the county assessor’s office has appraised the property for property tax purposes. Although these appraiser are licensed also, they often make mistakes and often do “windshield” appraisals. Some times they appraise every few years and use a formula (based on sales in the area) to raise values in off years.
My advice, having been a Realtor and having helped value thousands of properties for my county, would be to get a free “opinion of value” from several Realtors (they are not licensed to do appraisals). Choose well-known active full-time agents for this purpose. You’ll come as close by averaging their estimates as would by hiring and paying for an appraiser. --Eduardo
Re: Establishing real estate value - Posted by Tom Brown
Posted by Tom Brown on November 17, 1998 at 13:13:15:
How old is the appraisal? Generally, anything older than 6 months to 1 year, depending on how hot the market is, is considered outdated.
How experienced is the Realtor and where are the comps located in relation to the subject property.? How do the comps compare in style, size, condition, etc. to the subject property without any adjustments?
Is the neighborhood changing or has something happened to the property recently that could change its value?
I really hate answering a question with more questions but you need to consider the answers in determining the accuracy of the two ESTIMATES. Both the appraisal and the market analysis are only estimates of the properties value. The real value is how much someone is willing to pay.
All that said, all things being equal, if the appraiser is certified/licensed and experienced I would tend to look more at the appraisal IF it is current. Not so much as a rock steady number but more as a general guideline. If the appraisal is outdated and a bank is involved with new financing, you are going to have to get another appraisal anyway. Remember, bankers couldn’t care less what the Realtor thinks it is worth.
The best thing to do would be to look at the reason why the numbers are so different. There must be something going on to affect the estimated value of the property so drastically.
I know that that is not a concrete answer, but I get the feeling that something is going on and you need to dig a little deeper into the situation.
Re: Establishing real estate value - Posted by Richard
Posted by Richard on November 18, 1998 at 20:00:53:
A few more thoughts. I have been investing, landlording, fixing and selling houses since 1986
and have learned a little and seem to learn
weekly. Make up a list of comps which are
VERY near yours, LOOK at them to make sure
they are in fact comps, determine sales price
per sq. foot, average at least 15/20.
If the purchase price of yours is more than this
average, you will loose money.
Very few agents/brokers care how much you
pay; any commission helps pay the bills.
Be conservative. Think like a bank.
Good luck
Richard