Using appraisals to determine market value is an effective tool to avoid buying a home that is worth more than it is worth. Along with some other technical appraisals, they can also be used as an effective negotiation technique to buy a home for less than it’s worth.
Valuations are a very subjective process. This means that all conclusions, while based on a certain set of guidelines and rules, are ultimately determined by what a person thinks. Many factors go into determining market value. Some of which are under his control and some of which are not.
The things that are in your control are things like how new your kitchen is, bathrooms, any remodeling or updating you have done to the house. Things that are out of your control are things like what neighborhood the property is in, other properties that are in the neighborhood, and the median income for the city in which the property is located.
While we as humans assign intrinsic value to items, property appraisers determine a property’s actual value using the above criteria as guidelines. Again remembering that we are human, the process of determining market value can be influenced by asking the right questions and pointing out particular aspects of the property that the appraiser might miss.
I have successfully increased the appraised value of a property by calling the property appraiser and asking “What can be done to increase the value of this property?” I also asked what items of property went down in value when they were determining the property’s market value and asked how I can fix or change them to increase the value. By simply asking for more, you can usually get more. It’s as simple as that.
However, one thing I have found to be true with all property appraisers is that they do not like to release property value after inspecting the home. I found out later that this was to avoid any confrontation with the property owner. But I also found that if I was there for the appraisal and was very courteous when I called them after they left, my chances of getting the value increased much more than if I just ignored them and let them do the appraisal.
As with anything, it’s all about networking and being friendly. That is the most important factor you have control over when an appraiser determines market value. Investing in real estate can create financial freedom, and one of the biggest factors that determines whether or not you’re going to cash a big check or a small check comes down to how you interact with a person who needs to make a subjective decision. That is why I recommend that you be very FRIENDLY with this person.
All in all, determining market value is a very easy task with or without an appraiser. The bottom line when investing in real estate is both buying the property for the correct amount and selling the property for the correct amount. Spending some money up front to ensure you’ll earn more later is a no-brainer in my book.