What Is Involved in a House Valuation?
In a house valuation, a professional with experience in valuing homes will examine a home to determine its value for the purpose of putting it on the market, writing an insurance policy, or other activities where the value of a home may be important. Typically this person is a neutral third party with no financial or personal interest in the value of the home, with the goal of achieving a fair and unbiased valuation. Real estate agents may be able to offer a quick topical estimate to a homeowner preparing to put a home on the market, but it can be helpful to solicit an independent appraisal.
One concern with house valuation is the purpose of the valuation, as this will have an impact on the final determination of value. Insurance companies, for example, want to know replacement value, looking at how much it would cost to rebuild a home after a fire, flood, or similar disaster. In this case, the mode of construction, amenities, and so forth are important to take into account. When a home is being valued to determine a sales price, however, the total value may be higher, as it reflects the location, desirability, and other factors that insurance agencies do not take into account when insuring homes for their replacement value.
The first step in a house valuation usually involves looking up records pertaining to the house to learn more about it, including floor plans, permits, and other documentation that may be stored at a central building office. The person performing the valuation also visits the home to assess it, taking note of any special features and inspecting the home to learn more about the construction techniques, special features, and so forth. Many professionals who determine house value use a checklist to record things like the type of flooring used, condition of the roof, and other characteristics.
House valuation also includes looking at comparable properties, known as “comps” in the real estate industry. For real estate sales, it is important to know what homes in a similar style and location are selling for, as this can determine sales prices. In the case of a house valuation for replacement value, the person determining the value wants to know how much it costs to build homes of a similar type, looking at materials, labor, and the inevitable overruns that tend to arise during construction projects.
A thorough house evaluation can take a week or more, including all the research, site visits, and preparation of a formal written report. It may be possible to expedite the valuation in some situations for a fee.
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