The Appraisal Value of Your Home

Recording an accurate home appraisal is critical to the real estate investment process. Property appraisals combine developments within local real estate activity alongside national economic trends to make value estimates.  With proper appraisal of property value in hand, you may then coordinate a profitable real estate strategy.  For property tax purposes, government officials conduct their own separate assessments, which ultimately affect your bottom line.

Comparable Real Estate

Professional real estate appraisers begin with taking notes of comparable sales figures, or comps, within your immediate zip code. Comps refer to properties that carry numerous similarities to your current space. For example, owners of a two-bedroom condominium will analyze the recent sales prices of other comparable two-bedroom condominiums within their neighborhood, as a valuation model. Sales activity within your surrounding subdivision is often the most accurate data for appraisals. You may find property sales information within your local newspaper or at various real estate websites, such as Zillow and Redfin.

Home Improvements

Home improvement projects and upgrades should add to your appraised value. Real estate investors and homeowners may renovate kitchens, install hardwood floors and order stainless steel appliances to support higher appraisals. Alternatively, allowing your home to fall into disrepair translates into weak appraisals. Older homes that do not meet municipal building codes are susceptible to poor valuations. Prospective buyers then recognize that the unit requires expensive work to meet minimal living standards.

The Economic Cycle

Real estate appraisal values shift over time, in conjunction with the domestic economic cycle of growth, recession and recovery. Strong economies that create jobs translate into higher property values. In recession, housing prices deteriorate, as housing demand suffers. At that point, financially strapped adult children and their parents may all take up residence together to save housing costs.

Real estate activity also fluctuates with mortgage rates. Low mortgage rates are ideal for appraised values, because home financing is then more accessible for prospective buyers. Alternatively, high mortgage rates translate into less affordable monthly payments for consumers. At that point, property values would then fall with reduced demand.

Investment Strategy

Homeowners that benefit from higher appraised values may elect to put property up for sale, at a profit. Alternatively, investors that operate within weak housing markets should exploit opportunities to buy cheap real estate and hold rental property. These investors can collect rental income, until the market recovers.

In terms of property taxes, government authorities use computerized models and mathematical calculations to coordinate assessments. Tax assessed property values are generally 10 to 20 percent lower than market value, or a proposed selling price. These models vary according to municipality, and you may verify important details with your local Treasury office.

Property Appraisals and Market Value

Property appraisals are estimates that may not match true market value. Numerous subjective variables are taken into account when negotiating home prices. For example, a family of four may insist on paying top dollar for a home that features a security system. Without a pre-installed home security system, you may be forced to significantly lower your asking price beneath its appraised value to close this deal.