There are different appraisal methods. Some of these are replacement value appraisals, income value approach, and comparable sales approach.
Commercial properties are valued according to their income. The higher the income, the higher the appraisal. Single family homes are not appraised on an income basis. They are appraised using the comparable sales method. What does this mean to home sellers. Let’s dive in a little and see what this means, and how they arrive at a value.
Comparable sales is a simple approach: look at what other similar houses have sold for recently to arrive at a value for your property. Not all houses will be identical, so the appraiser will make some adjustments to determine value. They often will work within certain parameters such as sales of six month or less, and sales within a certain area close to the subject.
The seller’s house is referred to as the subject property. The house sales used to determine value are referred to as comparable sales or comps for short.
An appraiser will attempt to find houses as similar to the subject property as possible. Since not all houses are the same, the appraiser will make adjustments. Adjustments are made to the comps, not the subject. Adjustments may be made for size, construction quality, location, age, and amenities, and other factors. Here is how it works:
1. An easy way to remember how adjustments are made is simple: CBS and CIA. CBS stands for comp better-subtract. CIA means comp is inferior-add.
Example: Bill sold his house down the street. It had a pool. Yours does not. So, the comp is better than the seller’s house. Remember–comp is better-subtract. So the appraiser will set a value for the pool and subtract from the comp selling price. Comps are adjusted for price-not the subject. Let’s turn this around: your house has a pool, and Bill’s does not. So the appraiser will then ADD to the sales price of Bill’s house. Remember–CIA. Comp is inferior–add.
What if your house is on a busy street and the appraiser cannot find similar houses sold on a busy street within the past six months? They will subtract from the comps–CBS–to make up for the difference in demand and therefore selling price.
What about size difference? What about age difference? Generally, if the size difference is minimal, say 100 feet or less, they will not make a size adjustment. If the houses are similar in age, they generally will not make an age adjustment.
What about the house around the corner that sold for a very low price? Certain situations may result in this happening, so often the appraiser will ignore that sale realizing that external forces resulted in the lower sales price, and not the market. Sometimes this could be divorce, death, illness, or other reasons.
These are some of the factors an appraiser considers when making a determination of value. Location, view, amenities, upgrades, and more are all considered. Three different appraisers may come up with three different values.
At swflcashforhomes.com we do not have appraisals done. We inspect the property, and determine what a fair cash offer would be. We know the seller wants out fast, so we set a very short inspection period.
If you want to list your house, remember you must sign a listing agreement, have open houses, and more often than not an appraisal. If you have time to wait and do not mind having several people through your house, listing it is your best option. However, if you wanted it gone yesterday, contact us today. We work fast to help you move on.
Fill in the form on our website or call us at 239-200-5600.
www.swflcashforhomes.com
