one was for value by sales comparison of $95,000 and the other value by cost approach of $174,200. What is the difference? We are purchasing the home for $89,000.
2007-02-15 05:15:16 · 6 answers · asked by L D 3 in Business & Finance ➔ Renting & Real Estate
Appraisal value can be reached using 3 different approaches: Cost, Market (sales comparison), and Income. The last is only used for income properties.
The Cost Approach reflects what it would theoretically cost you to go out in today's market, buy the land, and have the current structure built, and then allows for a discount based on the age of the building. The Market Approach is based on the sale of comparable properties in the same area. The appraiser finds similar properties, finds out what they have sold for, and then adjusts for a higher or lower value based on the differences between these properties and your house (location, size, amenities, etc.).
Based on the info you've given, the appraiser has concluded that it's not economically feasible in your area to build new properties. However, if you're buying for $6M less than the value comparables would indicate, then it appears you're getting a good deal. Hope that helps - good luck.
2007-02-15 05:42:00 · answer #1 · answered by Marko 6 · 1⤊ 0⤋
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2016-10-02 04:41:46 · answer #2 · answered by ? 4 · 0⤊ 0⤋
What is the difference? Simple answer $79,200.
Seriously though, the sales comparison is what's important for the purpose of a purchase. It says that on the open market, the seller should reasonably be able to hold out for $95,000. So you're getting a real good deal - be happy. Be very happy.
The other number is what you'll probably want to insure it for. That's what the appraiser thinks it'll cost to re-build should that be needed.
2007-02-15 05:23:27 · answer #3 · answered by teran_realtor 7 · 2⤊ 0⤋
The first is the price the appraiser thinks is a good price for the area. Generally it reflects what a house in the area will sell for.
The second is the cost to build your house from the ground up, in todays economy (Cost of labor - supplies - material- permits - and on and on). This figure is important because You should insure the house for the full replacement value.
I had a fire at my house, the replacement value was $350,000. The mortgage was $120,000 and the insurance was $123,000. The insurance company paid $123,000 - if I did not know what I was doing I would of had $3,000 to repair my house.
2007-02-15 05:30:42 · answer #4 · answered by whatevit 5 · 0⤊ 0⤋
Near the end of the report you should see a page that has the appriaser's signature and stamp. The value you see there is the appraised value used for your home loan. (This is subject to appraisal review via your lender)
2007-02-15 05:43:56 · answer #5 · answered by yourstruly_76 1 · 0⤊ 0⤋
It appears to be the difference of the value of the property to buy / sell, and the cost to rebuild that property if it was destroyed.
(therefore you would get a brand new property)
2007-02-15 05:21:13 · answer #6 · answered by Master U 5 · 0⤊ 0⤋