Besides satisfying your curiosity, knowing your home’s value can come in handy. A home appraisal is an unbiased evaluation to determine your property’s market value. This is the third of a three-part series.
Litigation can generate the need for an appraisal in several ways.
Let’s say the government plans to expand a roadway to reduce traffic congestion. The only hiccup is that they need some of your land to do so. The bad news is that the government has the right of eminent domain—they can take your land. The good news is that they have to pay you for it.
Rather than accepting their first offer of recompense, you can get an appraisal to see what the land is worth.
Dividing the property
Another reason for an appraisal arises when litigation requires land to be divided among two or more parties. In this case you’ll want to know the full appraised value of the land as a whole and what the value of each piece would be once it is divided. This is important whether you want to sell or obtain a loan for one of the newly created parcels.
An easement occurs when you grant someone the right to use part of your property, even if you do not sell it to them. An easement can reduce the value of your property because you can no longer do whatever you like with it, and/or there may be significant downsides to someone else’s use of it. Let’s say you own several acres, but the property behind yours is land-locked—there is no access without going through your property. Once you allow access, maybe a dirt road or a long driveway along the edge of your property, you’ll have to deal with dust and the danger of unfamiliar drivers.
Obviously, the value of the easement or decrease in property value depends on what the easement is for, how big it is, who can use it, and where it goes. An appraiser will consider all these factors to determine a new value.
Another use of an appraisal can arise if you sue someone and win. If they own real estate, you may want to force the sale of the property to provide the cash they need to pay the judgment against them. An appraisal provides a starting point for property valuation. It can be tricky, because the appraiser will have to make some assumptions regarding the condition of the interior.
Not a do-it-yourself thing
Many people are tempted to go to websites like Zillow.com for a property value assessment. There’s nothing wrong with this as a starting point, but Zillow has limitations. Zillow and similar sites use a basic algorithm, sometimes it’s zip-code driven, but it might not even be community specific. Zillow has no way to know the condition of a property—only what other houses have sold for.
Zillow doesn’t know whether the owners have harkened back to their favorite decade for style inspiration—the 1970s—installing avocado green appliances in the kitchen and orange shag carpet in the living room. Zillow also doesn’t know that the owner moved out of the area several years ago and left her 20-year-old son to live in the house, where he has thrown parties at least three days a week. Finally, Zillow’s report does not account for any deferred maintenance—a leaky roof, overgrown landscaping, or a pool with crack in it.
The bottom line is this: if you want a current, accurate fair market value assessment of your property, you’ll need to hire a competent appraiser or Realtor who is familiar with the neighborhood. A computer algorithm doesn’t take into account important factors that humans notice, like whether there are large power lines overhead or whether car headlights will constantly shine into your living room. If you want a thorough assessment you need a human to consider the kinds of things that add or detract value from your home.
If you have questions about property management or real estate, please contact me at email@example.com or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery.
Dick Selzer is a real estate broker who has been in the business for more than 45 years.