Additional Appraisal Information
An appraisal is a necessary step in the home purchase or home refinance process. Most lenders will not lend on a property without an appraisal. Below are a few more reasons why an appraisal might be necessary:
- To determine a value when selling a home.
- To contest high property taxes.
- To finalize and settle a divorce.
- To settle an estate.
- To use as a negotiation tool when selling.
- To establish the replacement cost (insurance purposes).
- To protect your rights in an eminent domain case.
- To refinance.
What are Home Appraisal Methods?
Appraisers use three common approaches when establishing the value of a given property:
- Sales Comparison Approach: In this approach the appraiser identifies 3-4 comparable properties in the neighborhood which have recently been sold. Ideally, the properties are close in vicinity (within a 1/2 mile radius of the subject property) and have sold within the last 180 days. These home will be of a similar nature in size, rooms, and layout. The appraiser then compares the sold properties to the subject property. The factors used in the comparison include square footage, number of bedrooms and bathrooms, property age, lot size, view, and the condition of the property. This is the most common approach used in appraising residential or home properties.
- Cost Approach: In this approach the following formula is used to arrive at the property value: Value of the land (vacant), added to the cost to reconstruct the appraised building as new on the date of value, less accrued depreciation the building suffers in comparison with a new building. This is typically used with income or commercial properties.