How to Determine a Property's Value
There are two primary methods commonly used to determine the value of an investment property. They are (1) hiring a real estate appraiser and (2) using a Realtor to determine the market value. I will cover these in detail below.
Hire a Real Estate Appraiser: Once you find a property that interests you, you will want to determine the value of the property. To do so, you can hire a local real estate appraiser to inspect and appraise the property.
He or she will conduct a site visit to determine the value of the property. They will provide a written report with an appraised valuation compared to similar (recently sold) properties in the community.
It's important to keep in mind that banks require a written appraisal, in order to approve financing. If you're trying to get financing, it's important to contact the bank first, to determine their "approved appraiser list." Make sure you use one of the "approved appraisers" to appraise the investment property.
For a single family home, a typical appraisal can cost between $350-$600. Please know that this can vary by property type and state.
Another alternative is to contact a local real estate agent. This agent can provide you a "comparable market analysis." Also known as a "CMA" this analysis will provide you a "value range" of the property based upon recently sold comparable properties.
They will give you a value range, instead of a hard figure. For instance, they might say the property is worth $300,000 - $325,000, where as an appraiser would say, "Your property is worth $315,000."
Realtors usually provide this service free of charge, with the understanding that you will utilize their services to purchase the property.
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