Home Valuations For Dummies What Are The Differences

Dated: 02/21/2018

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Oftentimes, in speaking about home evaluations with the customer I will be asked to give an evaluation for determining the value of the home in the current market for purposes of sale, for a speculation, maybe a couple is breaking up and need an idea of what they can sell their Real Estate for.  Sellers or Buyers for that matter, aren’t sure what the right term or which evaluation is necessary.  Here’s a little break down on the terms so it’ll be easier for the client in the long run to know exactly what it is that they will need for their situation.

APPRAISAL

The appraiser is generally hired by the Bank or by the consumer to conduct an independent, unbiased appraisal of their property to estimate value.  Only licensed or certified appraisers are permitted to appraiser Real Estate property.  They are licensed by the state after completing classroom instruction and 2000 hours of appraisal experience.  Only then the individual can become certified as an NJ Appraiser.  There is always a fee for the appraisal which can vary from about $400.00 - $500.00 per hour for a Single-family home and for a Multi-family home the appraisal can start at $600.00.

Some examples on why to hire an Appraiser

  • Applying for an extension of credit

  • A legal issue. i.e. settling an estate due to death or perhaps a divorce situation

  • A financial institution will require one for a home equity, re-fi or purchase.

  • In an active market, the seller may hire one to see where their house stands in an area where prices are going up.

COMPARITIVE MARKET ANAYLSIS OR SOMETIMES CALLED MARKET EVALUATIONS

These reports are completed by a licensed Real Estate agent.  There is generally NO CHARGE on these reports.  The licensed agent will come to your home, examine the property, get pertinent facts from the owner/seller regarding any improvements or repairs for the purpose of listing the property for sale.  The agent will pull like/similar properties from the multiple listing service and compare recent activity within a 3 - 6 Month period then provide the seller the opinion of value based on the activity to determine a price to list the home for sale.

BROKER PRICE OPINION

A Broker Price Opinion aka BPO is NOT an appraisal.  This evaluation is generally done by a Real Estate Agent/Broker or qualified individual of a firm.  The BPO can come in different forms and requests.  At time the BPO may be order as a drive by where the agent or evaluator doesn’t have to enter the property.  The BPO is done based on the characteristics of the property, like/kind properties within an acceptable radius of the subject property.  Some of the factors that a broker will consider when pricing a property include: the value of similar surrounding properties, sales trends in the neighborhood, an estimate of any of the costs associated with getting the property ready for sale and/or the cost of any needed repairs.  They are generally ordered by financial institutions or companies for examples like refinancing a property, evaluating a distressed home, loan modifications, individuals that are behind in their payments, etc.

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Lucy Korzelius

I got into the Home Dream profession in 1992 because of my passion for Real Estate. The love of buying, selling, architecture, design, lifestyles, etc...the ability to combine them and the desire to ....

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