There are four basic ways an appraiser can measure the value of your property. Site Valuation
Income Capitalization
Cost Approach
Sales Comparison Site Valuation This is the value of the land itself. This is separate from the value of the property. An identical structure on 2 different properties may be worth the same in two different towns. In one town the land may be worth much more, so the overall value of the property (land+structure) is worth more. Income Capitalization This is valuing a property based on the amount of net income it can produce. This involves understanding how much income a property can generate and how much expense it costs to own it. Since rental values can vary greatly between different towns and areas this method can also give insights about the value of a property. This is most often important to investors, not people who are buying a primary residence. Cost Approach The value of a property is determined by: figuring out the cost of replacing the structure subtract depreciation add the value of the land this will net out the property value Sales Comparison This is a comparison of the value of different related properties. Your property can be compared to other similar properties based on: proximity
square footage
land size
features (pool)
number of rooms
other house features This method compares the property based on current market data. An important item to note is that in a market where prices are rising fast there are properties that are in escrow but not recorded yet and not included in the analysis. These properties usually reflect the rising prices in the area. If these higher values can be used then the sales comparison method can yield a higher value. This depends on how fast the escrows close and are recorded, and whether you can wait for this. |
