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December 3, 2010

Property Valuation Versus Property Appraisal

Filed under: investment — Tags: — admin @ 12:17 am

How can you know what your home is really worth? Why is there such a discrepancy between the values? Much of it has to do with how the values are determined by each professional. Lets take a look at the differences between an appraisal and a valuation.

After years of serving your family as a wonderful and comfortable home, you have made the decision its time to sell your house. Of course you want to get top dollar for your investment so you turn to a professional real estate agent for an appraisal as guidance on how much to ask. You are thrilled with their initial selling estimate only to be confused and frustrated when the valuation report come in $50,000 less.
Appraisals

An appraisal of your property is intended as a guide only and can be prepared by a real estate professional. The preparer takes into account the local area as well as recent sale prices of comparable homes. An appraisal has no legal basis or standing and they are generally requested by sellers looking for an ideal of how much they might get for their home.

Valuations

To have a formal valuation you must turn to a qualified valuer with the necessary training, education and experience to ensure they consider all the issues and features pertaining to your property. You should expect to pay $300-$500 for the valuation and can expect to receive a detailed, written report. Valuing a piece of property can be a complex undertaking and usually takes time to do correctly and will consider items such as:

* Locale and zoning
* Construction and condition of the structure
* Location and positioning on the lot
* Any covenants or encumbrances
* Construction or building defects
* Unique feature of the home

Do I Need An Appraisal or A Valuation?

There are very few times when a valuation is not required as part of a home sale transaction. They are typically required when it is necessary to set a definitive value for a piece of property. Some examples include establishing the value of a deceased persons estate, buying property that has been foreclosed on, or a property settlement. Of course, if a lender is involved in your transaction you will almost certainly be required to have a valuation.

Why ask for an appraisal then? Simply, because they are quick, straightforward estimates of what you might expect your home to sell for. If you are just beginning the process of selling or simply thinking of testing the waters, a real estate professional’s estimate of what you can ask may help you make you decision before you have to spend money on the valuation.

Perhaps the appraisal will reveal that a few upgrades may make a big difference in asking price. In some cases just having someone else walk through you home with a critical eye will help you find items that need to be addressed. Additionally, a real estate professional sees many homes in the course of their work. They will be uniquely qualified to point out issues that will need attention prior to a formal valuation.

As you get closer to the time you’re ready to sell your home, having a formal valuation performed and available for potential buyers to review can make the process of closing on the sale easier and more comfortable for everyone involved. It can also aid in ensuring your home sells faster. How? Because you will be asking an appropriate amount for you home, not overpriced turning away interest, and not under-priced leaving potential buyers wondering what might be wrong with the property.

In the end, you will benefit from having both an appraisal and a valuation. While they both provide important information for you as you prepare to sell you home, they do serve different purposes. Use an appraisal to get an idea or range of what your home may be worth. Get a valuation to narrow the range and know exactly what the correct asking price is… then sell your home with confidence.

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