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An Apprasier's approach to real estate.

By
Real Estate Agent with Keller Williams - North Country

Here are some of the principals a real estate appraiser will consider when he is valuing a property.

The appraiser is always aware of the four characteristics of value for a home:

Demand - - in order for something to have value, someone must want or need it

Utility - - the ability to fill a need -

Scarcity - - less supply than demand

Transferability - - able to be sold

 

The appraiser will also rely on several principles that are standard in the industry. These include:

The Principle of Substitution - this sets an upper limit on price by stating that an individual is not justified in paying more for a subject property than he would have to pay for a similar substitute property.

The Principle of Conformity - states that maximum value is achieved when there is homogeneity or similarity in an area, and also that houses in the same neighborhood tend to conform in price.

The Principle of Highest and Best Use - the use of a property which gives the greatest return in money or amenities. Amenities are those things that enhance the enjoyment of real estate but are not necessary for its intended use. Examples: a scenic view, swimming pool, etc.7

The Principle of Increasing and Decreasing Returns - this is an awareness of the contribution of improving property, and states that it is wise to continue to invest in improvements as long as for each dollar spent, value increases a dollar or more. When additional investment returns less than a dollar for each dollar spent - stop. In other words, it is not wise to over improve property.

The Principle of Regression - the presence of lower priced properties in the area will cause a decline in the value of the subject property. For example, if you build a $200,000 home in a neighborhood of $125,000 -$150,000. homes. The opposite occurs in the Principle of Progression where the value of a subject property is increased by the value of surrounding properties.

The Principle of Competition - the absence of competition will cause prices to be high. This will usually attract additional suppliers, and result in lower prices. For example, in a new subdivision with only one builder he may be able to make large profits on each home he sells, but if more builders enter the market with competing homes, profits will decline.

The appraisal report will always include the date, purpose of the appraisal, the / appraiser's opinion of value and his signature. An appraisal older than six months is usually thought to be outdated.

Below are some thoughts every home owner needs to consider when they are buying their first home.

•·         Thoughts here are will the home fit your pocket book now and to the near future ( Remember, most folks move every 7 years)?

•·         If you have to sell, will you have to spend a lot of money to get the property marketable?

•·         Are the homes in the area you are buying into going up in value or decreasing and what will the value of the home you are wanting to buy, be in 10 years?

•·         What about the neighborhood of the home you are wanting.  Are the homes clean, yards nicely kept or is the opposite true .. i.e. they have started building a structure outside, but not finished, old automobiles that are not running still in the yards, yards needing mowing?

•·         Is the city keeping the streets in good shape or is it obvious that the city has neglected the upkeep?

•·         Is the house you want, ready to move into without you expending money or your time, which you may not have a lot remaining at the end of the day, to get the home in shape where you will be happy?

•·         Ask about fire protection and police protection - just how well protected are you?

Your new home is the most expensive purchase you will probably make in your lifetime.  Try and think of all the angles and ask all the questions you can before making a decision.  While emotion is usually the reason why most of us buy a home, try and be as logical and analytical as you can and then GO FOR IT!