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Frequently Asked Questions

Investing in Real Estate - Q & A
Real Estate Value

Q: What is the difference between market value and appraised value?

A: Appraised value is a certified appraiser's opinion of the worth of a home at a given point in time. Lenders require appraisals as part of the loan application process; fees range from $200 to $300.

Market value is what price the house will bring at a given point in time. A comparative market analysis is an informal estimate of market value, based on sales of comparable properties, performed by a real estate agent or broker.

Q: How do you find out the value of a troubled property?

A: Buyers considering a foreclosure property should obtain as much information as possible from the lender about the range of bids being sought.

It also is important to examine the property. If you are unable to get into a foreclosure property, check with surrounding neighbors about the property's condition.

It also is possible to do your own cost comparison through researching comparable properties recorded at local county recorder's and assessor's offices, or through Internet sites specializing in property records.

Q: How do you increase the value of your property?

A: The biggest factor outside of a homeowner?s control is market conditions. But other issues -- including the condition of the property, specific home improvements and neighborhood stability and safety -- can influence property values.

The greatest rise in home prices occurs when the economy is strong and the number of home sales is increasing.

Though markets vary, that has occurred twice in recent history -- in the early 1970s and the late 1980s. However, single-family homes appreciated much more than condominiums. While overall market conditions are out of the homeowner's control, other factors are not.

For example, specific home improvements can increase the value above the cost of the improvements. According to Remodeling magazine, which publishes an annual "Cost vs. Value" remodeling report, a remodeled bathroom returns 81 percent to the owner, a bathroom addition, 89 percent and a master bedroom suite, 82 percent.

Remember, quality pays. Well-planned and well-executed remodeling jobs are a good investment while bad work seldom enhances value or livability.

If you live in a high-crime area, an organized community watch program not only will lower the crime rate but also have been known to enhance property values.

Q: What are the standard ways of finding out what a house is valued at?

A: A comparative market analysis and an appraisal are the standard ways consumers, lenders and realty agents determined what a home is worth.

Your real estate agent will be happy to provide a comparative market analysis, an informal estimate of value based on comparable sales in the neighborhood. You also can research "the comps" yourself by checking on recent sales in public records. Be sure that you are researching properties that are similar in size, construction and location.

This information is not only available at your local recorder's or assessor's office but also through private companies and on the Internet.

An appraisal, which generally cost $200 to $300 to perform, is a certified appraiser's opinion of the value of a home at any given time. Appraisers review numerous factors including recent comparable sales, location, square footage and construction quality.

Q: Can you buy homes below market?

A: While a typical buyer may look at five to 10 homes before making an offer, an investor who make bargain buys usually go through many more. Most experts agree it takes a lot of determination to find a real "bargain." There are a number of ways to buy a bargain property:*Buy a fixer-upper in a transitional neighborhood, improve it and keep it or resell at a higher price. * Buy a foreclosure property (after doing your research carefully). * Buy a house due to be torn down and move it to a new lot. * Buy a partial interest in a piece of real estate, such as part of a tenants-in-common partnership. * Buy a leftover house in a new-home development.

Q: How can I improve the value of my property?

A: The biggest factor outside of a homeowner?s control is market conditions. But other issues -- including the condition of the property, specific home improvements and neighborhood stability and safety -- can influence property values.

The greatest rise in home prices occurs when the economy is strong and the number of home sales is increasing. Though markets vary, that has occurred twice in recent history -- in the early 1970s and the late 1980s.

Specific home improvements can increase the value above the cost of the improvements. According to Remodeling magazine, which publishes an annual "Cost vs. Value" remodeling report, a remodeled bathroom returns 81 percent to the owner, a bathroom addition, 89 percent and a master bedroom suite, 82 percent. Remember, quality pays. Well-planned and well-executed remodeling jobs are a good investment while bad work seldom enhances value or livability.

The safety and security of a neighborhood can affect property values, too. If you live in a high-crime area, an organized community watch program not only will lower the crime rate but give home values a boost, too.

Q: What kind of return is there on remodeling jobs?

A: Remodeling magazine produces an annual "Cost vs. Value Report'' that answers just that question. The most important point to remember is that remodeling a home not only improves its livability for you but its curb appeal with a potential buyer down the road.

Most recently, the highest remodeling paybacks have come from updating kitchens and baths, home-office additions and extra amenities in older homes. While home offices are a relatively new remodeling trend, for example, you could expect to recoup 58 percent of the cost of adding a home office, according to the survey.