I apologize if this is a silly question, but everything I’m reading keeps talking about the “market value” and “after repair value.” Where do you actually get these numbers? Are there appraisers who will come out and give you a value? What does this usually cost?
Like I said, this may be something that is just taken for granted, but I’m only 23 and I’ve never actually bought a house before, I’ve only rented. Therefore, I’m completely new to how all of this works. Any help is greatly appreciated!
Oh yeah, one other question. When people talk about “closing costs” what do these costs consist of? Are they fees? Who do they go to?
I can tell you what I know.
You can get a home appraised to find its estimated value. This might cost you a few hundred. You might do this on your own property. When you buy a property, refinance, or take out equity, one is done for the lender. This is paid for in your closing.
You can get a homes estimated value by asking your realtor to do a comp for you.
You can figure it out for yourself by knowing the market, which includes looking at similar homes in the immediate area and seeing what they sold for, are selling for, and when. This is what your realtor will do basically.
The ARV is done by an appraiser. This is for rehab projects.
Closing costs are fees to you for buying OR selling the property. When you buy a property, you should try to get the seller to pay your closing costs. Depending on the market the seller either will, won’t, or will agree to pay $x towards them.
Hope that helps.
- You can figure it out for yourself by knowing the market, which includes looking at similar homes in the immediate area and seeing what they sold for, are selling for, and when. This is what your realtor will do basically.
In Texas the taxes are appraised on this and the county appraisal district will give you these figures. You have to make sure that the houses they give you are really like the one in question.
You can also take your contractor with you. He will give you an estamate to actaully bring the property up to standard. You add that to the asking price and see if you are where you want to be.
I want to add that your safest bet is to know the market. If all you do is rely on what other people tell you something is worth, you are just asking for trouble.
I know recently someone told me a property was worth $x. I laughed and showed them a better property in the same area that was less. If you don’t know the market well, you are just riding the current to where it takes you.
Thanks very much to both my responses so far. So, when you say “know your market” just how do I begin generating this information? How do I find out what other houses in the area have sold for? Is there someplace you go to look this stuff up?
Sorry, but I guess I really need some specifics to understand and get myself started!
Well, actually, I’m currently living in New York, but I’m thinking about moving back to Kansas City to be closer to my family. I think the New York market is probably too overinflated to get started in, so I’m just researching and trying to learn all I can because if I do move to KC, I think that might be a good place to start. What do you think? Would Kansas City be a good area to invest in? The home prices are much lower. I think lease-optioning would be what I’d like to start out doing.
When I was wrapping up my appraisal career I appraised strictly REO’s (Real Estate Owned) properties. My clients wanted an “as is” value, and “as repaired” value, and they wanted my opinion on whether they should repair it or sell it as is.
I’ve performed an estimated 4,500 valuations thus far in my career.
I would highly recommend you use the services of a professional. Interview them as if you were going to hire them as an employee. Agents will probably perform a CMA for free, whereas an appraisal could cost upward of $400 (they haven’t seen a cost of living increase in well over a decade).
The higher the cost of the home…the greater the likelyhood you’ll make a large mistake estimating in either direction. I’ve seen people make terrible mistakes in my career…all the while arguing my opinion of value (it’s funny, but when it comes to money–some people are very emotional…they view the pro’s as the dumbest people who ever laced up a pair of shoes).
After some time looking at homes…you’ll probably become very astute at spotting a deal.