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How to decide a home's value |
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Page 1 of 2 So there you are, having finally decided on a house you'd like to buy. But how exactly do you decide what it's worth?
Sure, the seller has listed an asking price, but is it really worth all
that much? Probably not - after all, that's what the seller would LIKE
to get for it, not necessarily what he WILL get for it.
Appraising the real value of a home is tricky, because it can depend on
a great number of factors. These can include the condition and features
of the house itself as well as the general neighbourhood and the
current real estate market.
The most objective assessment usually comes from an
appraiser, who has sufficient knowledge, training and experience to
accurately estimate its value.
In this detailed and time consuming report, appraisers use comparable
sales together with information about the property being appraised, its
neighbourhood and community along with the local and national economy,
to support the appraised value.
The most important thing you can do when previewing is to look at the house as if empty: four walls, floors and a roof.
Don't let the current owners' furniture and decor influence you. If you
are buying a house with the owner carrying the paper (loan), it is well
worth the cost to hire an appraiser to make sure you don't pay more
than it is worth.
For your protection many real estate agents will write in a purchase
contract: this contract is contingent upon the property appraising for
the sales price.
How is value established?
The value of a house is based upon recent sales of the similar
neighbouring homes in the market as well as rentals and listing data.
Ideally, appraisers want to use sales of properties of the same size,
age, room count, condition and with similar amenities and external
influences. This rarely happens though, so adjustments have to be made,
based on what people will pay extra for.
Examples: extra square footage, bedrooms, fireplace, upgrading, parking
facilities, swimming pool, lot size, location and so on. To help get a
better picture, this information is entered on a form, a value for
differences is established and comparisons are made to the subject
property.
A minimum of three verified closed sales with photos are required to establish a value.
Houses appraise for more when these conditions are met:
- Well maintained inside and out.
- Located in a good school district.
- Additions are done with the proper building permits.
- Additions conform with and fit well into the existing house.
- Properties throughout the neighborhood are well maintained.
- Not over improved or the largest house on the block.
- Style of the house conforms with those in the neighbourhood.
- Zoning changes are not expected or there is not a mixed use.
Remember: Location, location, location.
You can change everything about a house except it's location.
What is poor location?
- Located on a feeder street.
- Under an airport flight path.
- In or near a gang territory.
- Centre of nightlife activities.
- In a rundown block or neighborhood.
- Next to a school or school yard playground.
- Next to apartments or commercial property.
- In very close proximity to a major highway, expressway or railroad.
- Next to a gas station, near a municipal garbage or toxic waste dump.
- Odours from factories, farms and processing plants are routinely noticed.
- The city is affected by the closing of a major employer.
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