Another option for valuing your property is to hire a professional appraiser to do a formal real estate appraisal. A professional appraiser will typically charge between $500 and $1,000 for this service.
There are all kinds of appraisals, and they are ordered for a variety of different purposes. But when it comes to selling residential properties, an appraisal is typically done with the purpose of determining a property’s fair market resale value.
An appraisal is much more detailed than a typical CMA. It will include a detailed description of the property, with notes about the size, condition, amenities and upgrades of the property, and will usually include maps, photographs, and sketches of the home. In addition, an appraisal report will describe the overall market conditions in the area, including comments about the strength and trajectory of the local economy and employment.
An appraisal report will usually include three values:
- Cost value
- Income value
- Sales comparison value
The cost approach is what the appraiser figures it would cost to rebuild the same property, given the land value, material and labor cost, and depreciation of the improvements. The income approach is typically used for multi-family properties, but arrives at a value for the property considering how much income it would generate as a rental property, compared to other similar rental properties in the area. In the end though, most residential appraisals rely on the sales comparison approach – that is, they compare the home to several other recent “comparable” sales, make some value adjustments based on square footage, lot size, age, condition, and the like, and arrive at a value that way.
Fundamentally then, most appraisals are little different from a CMA, as the valuation approach which is most heavily weighted is the sales comparison method. Although an appraisal is more detailed, in the end, it comes down to the appraiser’s opinion of how much more the market values a two car garage versus a one car garage, a corner lot versus a lot in the middle of the street, and hardwood floors versus laminate.
Indeed, the Uniform Appraisal Report uses for a buyer’s loan will state:
The purpose of this summary appraisal report is to provide the lender/client with an accurate, and adequately supported, opinion of the market value of the subject property.
As you know opinions can vary, even among professionals with a lot of experience. No two appraisal reports will be exactly the same, and the values can vary significantly. An appraisal is a useful tool for figuring out how much your home is likely to sell for, but it’s important to understand that the actual sales price of your home can be much more, or much less, than an appraised value.