raveneye

Does anybody know what the usual formulas are that appraisers use, that compute the estimated sale value of a house from past sale prices of houses in the neighborhood? (not tax assessors, but appraisers)

My understanding is that they limit themselves to less than a mile from the target house, and no farther back than one year. But I don't know the form of the equations (relating sale price to size): is it just one linear equation with slope and intercept, or two linear equations, one for smaller houses and one for larger?

Any ideas or websites out there that give a tutorial?

NoSoup

Unfortunately, it is much more complex than that.

Typically, appraisers are going to look for comparable homes within a target area of the home that you getting appraised - homes with similar features. As I'm sure you're aware, it isn't all to often that you find identical homes, and this is where the appraiser's expertise comes in.

They make adjustments to the value of the property based on their expert opinion. For example, if the home you want appraised is 1500 square feet, and a home that they found near it that sold recently is 1600 square feet, they will take a variety of factors into account when they decide how much that the other home should be adjusted. Depending on the area you are looking in, that could be a nominal adjustment, or in some areas, that could be tens of thousands of dollars - it all depends on the appraiser's opinion of the value of your home vs. the comparables.

Although you outlined general guidelines, each home is different - as are the lenders that will be looking for appraisals. It also depends on the area you are looking to purchase in - it would be extraordinarily difficult to find several comparable homes meeting 1 mile radius, or even 1 year since the last time it sold date, if you were to look for a property in a rural area.

On the flip side, if you are purchasing a home within a large tract of new homes, a 1 mile radius may seem far to large to have a true appraisal.

I hope this didn't just confuse you more - if you have any more questions, just ask

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Xazy

It varies the rules in area to area, but normally it is zip code but i have heard of them using school district as well. Banks normally want more current then 1 year, but again it depends on the situation. Some can use stuff that are in contract or even on the market if neccesary.

But for the most part appraisers lack information that some real estate agents have, which is the current transactions, and only have the recorded sales. So it is hard to let you know the true value of your home. You can try to get several CMA from different real estate agents, or go to a website like housevalues. But since most real estate agents do not want to do your homework, they will by nature be more vague.

Cimarron29414

Are you trying to determine what price to use when you put your house on the market as a F.S.B.O.?

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Rodney

In my experience, there is no hard and fast standard for the size of the area. Sales of comparable homes in the neighborhood affect the assessment, of course; and the more homogenous the neighborhood, the easier for it is for them to find "comparable sales." My mom lives in a senior development in which all the homes, and lot sizes, are pretty close to identical in all meaningful ways. So the valuation of all the homes in that area are pretty seriously affected by sales of _any_ of the homes in that area. In a more mixed neighborhood -- not so much.

When we bought our house -- new, from the builder -- an appraiser came through to make a report for the mortgage company, title company, etc. And he looked at square footage and lot size; but he also looked at layout, amenities, even considered safety features required by new building codes, such as sprinkler heads, even the wooden bannister on the stairscase. There are many factors.

Elphaba

Variables concerning location play a role, as well. We live on lake property (high situs) but two lots to the right is a camper. Three lots to the right are four $1/2 million properties. One mile away are properties dependent on wells, (negative impact on property value), whereas we have a small public water system. I have a low bank beach; others have high bank beach access. I have nearly an acre of land, others don't have enough land to rebuild under current building and environmental restraints.

Bottom line, there is no single means of determining the value of a property by some calculated formula.

raveneye

Yep. What I did was go to a homevalue site, get a list of all the places that sold within a mile of us over the last year, and do a multiple linear regression on size, number of bedrooms/bath, and plug our data into the equation. Then I had a meeting with a couple of real estate agents. We put it on the market for about $10K above what my equation said, and about $10K below what the agents said they would want to list it at.

We live in a subdivision that was built just after Hurricane Andrew (about 12 years old) with fairly similar houses, but the sales recently have been extremely variable, without much explanation. The two most recent sales were a little crazy, with the big house selling for $20K less than the small house (about 600 sq ft smaller), but both were built the same year and were in excellent condition. The big house was sold with a national company that gets a flat fee, so apparently that was the reason they let it go for less.

Thanks for all the replies . . . just checking in again after the break.

ratbastid

That may be mathematically appropriate, but it seems to me not the best sales move.

If houses have sold for highly variable prices, then one of two things is going on: there's either a large seasonal variation (college town, for instance), or there's lots of inventory on the market and sale price is set mainly by the level of aggressiveness with which individual buyers bargain.

If it's seasonality, and you don't have to sell immediately, price it high and wait for house-sale season to come around. If you don't have time for that, then the season should dictate where in that $20K gap to put your asking price. If it's a matter of inventory glut, go with the realtor's suggestion, and work down.