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Is there a formula to calculate the residential home market value?

Discussion in 'Ask an Appraiser' started by jacobM, Aug 25, 2011.

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  1. jacobM

    jacobM New Member

    0
    Aug 25, 2011
    Professional Status:
    General Public
    State:
    California
    Hello all... thanks in advance to anyone that is willing to respond with suggestions, etc.

    I was wondering if there's a formula used to calculate residential home market value?

    We're trying to refinance our home and the appraiser would not disclose exactly how he arrived at the market value of our property. I also found data errors on 3 out of the 5 comps that were used, i.e. 2 car vs. 1 car garage, air cooling system different, bathroom and bedroom count listed incorrectly.

    Our loan officer had sent rebuttal, 2 emails noting the data comp errors and asking for the calculation of the market value from the appraiser. Finally, the appraiser DID make some corrections to the comps but our property market value remains the same. The only answer we received back regarding the calculation of value was: Most weight given equally to the 3 closed sales comps and the 2 active listings comps support the final opinion of value.

    On the original Appraisal Report, it says "Most weight was placed on the Direct Sales Comparison Approach. The Cost Approach provided sound support for the final valuation. Out of the 5 comps selected, 3 were closed sales and 2 were active listings.

    Should it be the average of the Sale Price/Gross Living Area of all the comps used multipled by my property's Gross Living Area? For example: take the average of the 5 comps (all variances adjusted) and multipled by my property's Sale Price/Gross Living Area. Using this formula, my result is $30,000 more than what the appraiser has.

    Any suggestions/advice would be greatly appreciated.

    Thank you.
     
  2. NORTON

    NORTON Senior Member

    0
    Oct 10, 2007
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    no, that method would only provide an amount stating bigger is always worth more....we can assure u, that is not always the case.
     
  3. CANative

    CANative Elite Member

    255
    Jun 18, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    Essentially we would do the same thing you'd do if you were shopping for a house. Compare what has been sold and what is listed. Not all houses are the same and not all buyers and sellers have the same motivations. So the prices will vary. If you spend enough time doing this you will get a feel for the value of any given house or at least about what it's worth... like a range.
     
  4. Delta85

    Delta85 Elite Member

    6
    Sep 22, 2007
    Professional Status:
    Certified Residential Appraiser
    State:
    Connecticut
    Depending on the amount and quality of comparable data and the appraisers experience in that neighborhood an opinion of value can be hard to explain if we have to "show the work" in terms of calculations and equations. Sometimes most weight is placed on the best comparable available or the activity closest to the subject or a home on the same street or whatever the situation calls for.

    In this market it is rare that you get 3-4 picture perfect comparables and the value screams loudly to even a non appraiser. That's why it is called an opinion of value.
     
    Last edited: Aug 27, 2011
  5. redfish

    redfish Senior Member

    42
    Sep 2, 2007
    Professional Status:
    Certified Residential Appraiser
    State:
    Michigan
    This is the only formula I know of for market value for your home.

    List your home + sell to buyer = sales price is market value.

    There is no formula avaiable for an opinion of market value only support for that opinion.
     
  6. Scott R Marshall

    Scott R Marshall Senior Member

    0
    Dec 14, 2006
    Professional Status:
    Certified Residential Appraiser
    State:
    New Mexico
    Unfortunately, for many homeowners the formula used as to whether or not an appraisal is good is as follows: Owners opinion of value - the appraisers opinion of market value = owners satisfaction with the appraisal. If the number is positive the owner is typically upset but if it is negative they are tickled pink.

    All joking aside, there really is no set formula, with a good appraiser analyzing all pertinent data and reconciling that to an opinion of market value. What is pertinent data? Well experience tells me that the more competent the appraiser is at completing said appraisal assignment, generally the more data is actually analyzed and the more various factors play into the appraisers final reconciliation.
     
  7. Mountain Man

    Mountain Man Elite Member

    30
    Jan 15, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Georgia
    It's an OPINION of market value, so see if your lender is willing to seek a second opinion. I don't know the value range you are in, but a $30,000 difference at 1.2 million isn't much, won't even cover half the real estate commissions. But $30,000 off at $130,000 is major.

    Also as a side thought, if you have a house that is a bit unusual... one thing I hate about the residential world of appraising for lenders is the underwriting stipulations and single point value rather than giving a range indicated in the market. At times it can force an appraiser to mess with the numbers so that it fits into a nice package that will go through an underwriters expectations of perfection. Unusual houses can be very hard to get approved and even harder to satisfy underwriting expectations.
     
  8. Walter Kirk

    Walter Kirk Senior Member

    15
    Jun 24, 2003
    Professional Status:
    Licensed Appraiser
    State:
    New Jersey
    Many people are under the false impression that an appraisal report is the product of numerical formulas, it is not. The size of the improvements (house, garage, porches, etc) are only one factor to be considered and in some cases larger houses can be worth less than smaller ones.

    You may have a problem with the appraiser but I think that you may also have a problem with the lender. Avoid large national lenders, apply for a loan with a local bank or credit union which is familiar with your market area. They generally deal with appraisers who know your market far better than the low bid appraisers used by the big national lenders.

    Keep in mind that your expectations about the value of the property may be unrealistic given the current economic conditions.
     
  9. Webbed Feet

    Webbed Feet Elite Member

    32
    Feb 11, 2005
    Professional Status:
    Certified Residential Appraiser
    I was reading and waiting for one of the other appraisers to say to you that the above in red font to be the ONLY reconciliation statement from a real estate appraiser is utter trash.... But none of the other appraisers that answered you wrote that.

    So I will.... The above in red font for the total and only reconciliation statement regarding that appraisers value opinion is complete and utterly meaningless trash. It is the kind of wording that should be expected out of a trainee or appraiser that was never trained by anyone worth spit.
     
  10. USPAP Compliant

    USPAP Compliant Elite Member

    2
    Jan 15, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    North Carolina
    I suggest this formula for a subdivision home that is typical for the market in my area is very often this:


    $350.00 X 1 qualified, local appraiser = 1 URAR 1004 appraisal for home owner personals use
     
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