Home Appraisal Cost

Be it buying or selling property, there are certainly a lot many formalities regarding the same. One of such formalities is getting a home appraisal done. This procedure has its respective advantages, both for the buyer of the house and the seller of the property.

What is a Home Appraisal?

This is a process that includes finding out the current price range of a particular property. This process is useful for the buyer, seller, as well as the bank who is offering a real estate loan for the purchase. By getting a home appraisal done, the buyer can determine if the seller is demanding more money than the market value. The bank would require these documents for processing the loan request made by the buyer for the property purchase.

On the other hand, the seller would be able to find out the value that he should receive on the real estate sale. The person or agency who does the home inspection is known as an appraiser. In the home appraisal procedure; the appraiser visits the property, clicks pictures, records the site measurements, and notes other aspects of the property, and eventually provides the requester with the report.

Types of Home Appraisals

Typically, there are three types of home appraisals that are done; namely from professional certified appraisers, real estate dealers and agencies, and online home appraisals. It will not cost you anything if you do an online home appraisal. There are some websites which give you a report according to the details you enter in, the location, and other similar factors.

Realtors may even give you reports based on their level of expertise and estimation. There are chances that they might charge you some amount for the service. If you avail the services of professional certified appraisers, you will have to pay a certain amount.

How Much do Home Appraisals Cost?

The cost is generally paid by the purchaser of the property. If you choose to get the home appraised by a professional appraiser, you may have to pay somewhere around $250 to $500. For a house worth $250,000 you may have to pay $300 roughly. Some professional appraisers may give you a separate report of the property prices in your neighborhood, for which they may charge an additional $50.

The cost also depends on how big your home is and the location of the property. Bigger the real estate, more will be the cost. For example, the overall cost to appraise a family home in New York City is $350; whereas in Bend, Oregon, it is somewhere around $475.

In some areas, the cost can even go up to a $1000. If you are want to appraise a property which is to be used for income generation, the cost would be more. In some loan programs, the buyer might be required to present a ‘drive-by’ appraisal report for loan processing, which may rule out the need for a full appraisal.

For a property buyer, spending few hundred dollars on a professional home appraisal is any time better than giving thousands of additional dollars to the seller.

How to Apprais a Mobile Home

Nowadays, when people refer to manufactured homes as mobile homes, they fail to realize the subtle difference between the two. Factory built single family homes, that conform to the code laid down by the US Department of Housing and Urban Development (HUD), are known as manufactured homes. The HUD code for construction and safety standards came into existence on 15th June, 1976. Whereas, mobile homes are manufactured homes that were constructed prior to 15th June, 1976. Throughout this article, the term mobile has been used synonymously with manufactured.

Steps Involved in Appraisals

Despite conforming to the HUD Code of safety and quality, the per square foot cost of these homes is generally 10 to 35 percent less than that of conventional homes. Hence, their appraisal has assumed a great deal of importance in the face of increasing popularity of these homes. Freddie Mac and Fannie Mae have laid down the rules for the same. At the least, the appraiser is expected to perform the following tasks:

  • Visually inspect the surroundings and the property under consideration
  • Determine the approach to be used for real estate appraisal
  • Assuming that comparable sales approach is used, the appraiser should collect comparable sales figures for recently sold neighborhood properties
  • Check the accuracy of the collected data by comparing the figures, against the numbers mentioned in the public records
  • Document the results in the Manufactured Home Appraisal Report that can be downloaded from Fannie Mae’s website

Choosing the Appropriate Method

An appraisal is an unbiased estimate of the value of the property under consideration using the standard and approved methods. The licensing requirements for appraisers vary from state to state. While appraising a property, the absorption rate for a neighborhood is particularly important. Absorption rate is defined as the length of time required to sell off the entire inventory of houses in a given neighborhood. A duration of 6 months or more is indicative of an oversupply of houses in the neighborhood and will consequently lower the price of the property being appraised.

Comparable Sales Approach: It takes into account the price of recently sold comparable properties. A comparable property is a similar property that is located in the same neighborhood. Comparable properties are also referred to as benchmarked properties. The price of the property, that is being appraised, is equal to the approximate average of the prices of the aforementioned benchmarked properties. Since no two properties are alike, the appraiser is expected to make the requisite adjustments in order to arrive at the fair market value of the said property.

Cost Approach: This approach is suitable for owners who own the land in addition to the house. In this case, the cost of the land is estimated using the comparable sales approach or some other suitable approach. The manufactured home is known as an improvement made on the land. From the cost of the improvements made on the land, the cost of depreciation of the manufactured home is subtracted and the resultant is added to the cost of the land.

Income Capitalization Approach: In this case, the value of the property is equal to the net operating income (NOI) divided by the capitalization rate. Specialized vendors provide the market capitalization rates for different types of properties located in an area. The NOI is calculated as follows:

NOI = Gross Rent – Vacancy Charges – Operating Expenses + Operating Income

The relationship between the Capitalization Rate, the NOI and the Fair Market Value (FMV) of the property is as follows:

FMV of the property = NOI / Capitalization Rate

Hence, on dividing the NOI by the Capitalization Rate, one arrives at the FMV of the property.

Since Fannie Mae and Freddie Mac have introduced additional requirements for appraisals, it would behoove the appraisers to consider supplemental certifications to update their knowledge regarding the appraisal of manufactured homes.