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Home Appraisal: Important Factors Used to Make Them

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By : Vicki Hat    99 or more times read
Whether planning to buy or sell homes, an appraisal is a very important tool to use. In selling, it helps you set the right price tag for your property. If you buy a house, this helps you make the right offer.

Home appraisal has tons of uses in the real estate industry. It even has use in the financing world. A lender would not grant mortgage application in the absence of appraisal. They rely too much on its results because for them this is the right basis for determining the loan amount. For the purpose of taxation and calculation of insurance, home appraisal is needed.

So what does home appraisal determine? It gives you the market value of the property. Although it is based on the appraiser's opinion, but these people follow a certain standard to perform their work with quality. Hence, you should be getting an appraiser that is certified or licensed and very well experienced.

Determination of the Market Value

Home appraisal has three approaches to determine the market value of the property. But to reach at an estimated amount, several factors are taken into consideration. These factors are what cause the rise and fall of the market value of the property. Hence, if you were the seller, you might want to focus on the factors that could add more value to your home.

Nevertheless, every user of the appraisal needs to know the factors involved. Doing so would tell you if the estimated market value is reasonable. You will then know if the property has been overvalued or undervalued by looking at the individual factors.

Factors in Home Appraisal

Here are the factors used in making the home appraisal:

  1. Location of the property- whether it is in the urban, suburban or rural areas. Housing trends within the location is also described. The neighborhood and the market conditions will also be identified. Zoning classification and its compliance, including the physical attributes of the area shall be pointed out.

  2. The utilities present and any improvements off-site will also be identified whether it is private or public.

  3. The house will be described according to number of units, stories, design, age, condition. The features of the house will also be specified, including the appliances and the number of rooms per type. Even energy efficient items will also be included in determining the overall value.

  4. If the method of appraisal used is the sales approach, 2 or more comparable properties will be selected and included in the report. The sales price of the property and the date and time of sale will be used to determine the market value.

  5. For the cost approach, the estimated reproduction or replacement cost is important. This will be based on the opinion site value, which is calculated per square foot. Deprecation would also be taken into consideration to get the final value.

  6. For the income approach, estimated monthly market rent is taken into consideration multiplied by the gross rent multiplier.

All of these data are based on Freddie Mac's Appraisal Report Form. Learn more about these things as you will be able to understand more how appraisal works. Just make sure to hire a good appraiser because only then will you be able to get a fairly accurate estimation of the market value of the property.

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