How to appraise my home?


June 24, 2020

The appraisal of a property is a report that can be helpful to people who are interested in selling their properties. Since not all investors need to sell their properties, the appraisal can help them know the market value of their property.

And as you can imagine, property value is one of the most frequent doubts investors have before selling a property.

While there are investors who decide to buy houses or condos to live in, it is increasingly common to acquire properties to generate extra income, a very easy and effective way in which investors can ensure their money. Therefore, for some investors, one of the purposes of real estate investment is the possibility of being able to resell their properties in the future.

Especially when the property they bought a few years ago, is quoted on the market at a higher price. So, even though today we have a lot of options like investing in the stock market or the possibility of acquiring shares in certain companies through portfolios or investment funds, as well as saving for the future through retirement funds, real estate remains the number one option for investors who want to protect their money.

What is the home appraisal and what is it for?

As already mentioned, the home appraisal is a detailed report to know the market price of your property. Similarly, the home appraisal is needed to calculate property taxes or when renting a property: it can help you to set the right rental price.

In addition, the home appraisal is a requirement to mortgage applications and home insurance. Although property insurance is not common, it is becoming more and more popular so that families or investors can protect their estate even more.

How do I appraise my home?

In order to know the value of your property, you have to hire an expert property valuer to do a home appraisal. The cost of the appraisal will be related to the size of the property. That is to say that the price can vary according to the construction, and for that reason, if you are trying to create a budget to hire an expert, it is important that you know the size of your property.

Furthermore, the fee for the appointment of an expert varies depending on the company or agency providing the service.

Remember that you can consult the size of your property in the Mexican Property Public Registry. In ‘What is the Mexican Property Public Property Registry?’ You can learn more about how does this public office work and why it is important in the purchase and sell processes.

What is a property valuer?

A property valuer is a qualified evaluator to appraise properties, certified by the municipal cadastre or the State Treasury where your property is located.

It is important that the property valuer is registered or certified by the Federal Mortgage Society (SHF by its Spanish acronym). This institution is in charge of regulating the value of private properties.

How to appraise my home?
The home appraisal is helpful in many ways, either to apply a mortgage, insurance or to give you an estimate of what you can ask for your home.

How many types of real estate appraisal exist?

Although are two different types of real estate appraisals, they serve the same purpose.

Commercial Real Estate Appraisal

The commercial real estate appraisal evaluates the market value of a property to be sold or rented. This evaluation will help you to price your home for sell. To calculate property value, it takes into consideration factors such as the cost of construction, the land, services and property location.

This type is the most common appraisal since capital gain, location and services are the most important factors to consider before acquiring a property.

Before acquiring a property it is very important to analyze the area where you want to buy a home, as well as its projections of growth. One of the advantages of acquiring a pre-sale condo is that you can buy it in an area with great capital gain and getting a fair price on it.

Cadastral Appraisal

This type of appraisal is more related to the property tax, although it also considers the construction and the developments or services in the area where the property is located.

How does the home appraisal process works?

As we have already explained, the home appraisal must be conducted by a certified property valuer, who visit your residence and thoroughly evaluates it. both of the house and of the other factors that can determine the value.

These are some of things considered when evaluating the construction of a house:

  • The quality of the materials.
  • Conservation of the property.
  • Design of the house.
  • The proximity to transport.
  • The proximity with services or commercial areas.

Things to consider will depend on the purpose of the appraisal. For example if you own a rental home, the valuer will consider the services near your home, the number of bedrooms and bathrooms, parking spaces or the proximity with places like hospitals, or schools.

Therefore, a home appraisal determines 3 types of values: property value, commercial value and income value. Commercial value focuses on property location and income value estimates property price for sale or rent.

How is property value calculated?

Physical value is related to the building materials and facilities. For example, some of the facilities of new build homes are air conditioner installation, or washing centers, which may not be included in older houses or may not work properly due to the passage of time.

This means that the valuer will have to inspect the interior and exterior building materials in order to evaluate if a condition would affect the property, or if that in the long term they damage it and compromise its structure, or life time. This is extremely vital since the expert has to establish the useful life of the property, the age they have (the property) and the age it reflects thanks to lack or good maintenance.

How to appraise my home?
Acquiring real estate is a long-term investment that you should consider if you want to make your money to grow or protect it from inflation.

Another step is to make an estimate of how much would it cost to build a property like the one being evaluated, which is why the evaluation must be thorough.

On the other hand, when it comes to looking at the market value of a property, factors such as location and comparison with other properties that are in the same condition as yours are things to consider. For example, a condo in Merida will not be worth the same as a property in the Riviera Maya. While the real estate market in Merida is focused on people who want to live or work in the city, the market in the Riviera Maya is focused on investment and tourism interested in the Mexican Caribbean.  While there is an influx of tourists in Merida, it is completely different from tourism in the Riviera Maya.

Thus, the appraiser has to find common ground in order to calculate an estimated price for the property.

The capitalization approach is related to rental properties and like the previous approach, the objective is to establish an average price according to the rental prices in the market.

It is important to emphasize that the data is a suggestion to establish a parameter of how much you can ask for your home. That is to say, you can increase the price for sale or rent and even lower it: everything will depend on your needs. The appraisal is a reference that will help you in your real estate negotiation strategies.

Once the data has been collected -that is, after the expert's visit-, the specialist will make a comparison of your house with other properties located in the same area.

The delivery of the appraisal result depends on the policies of the company or person who conducted the evaluation. In some cases, this process may take a few days, while in other, it may take a week or longer.

Once you know that you have an appraisal of your home, you can start your real estate negotiations.

Airbnb is a useful app more and more real estate investor are using. The most attractive thing about it is that investors can avoid the complications of renting their properties in very long terms. If you want to know how to generate extra income with your property and Airbnb, we recommend you to read our guide with the best tips to do so.

Banner of real estate developments in Merida.

Advantages of investing in real estate

Investing in real estate continues to be the number one choice for investors thanks to capital gain, which is the increase in the value of a property over time.

And this is one of the main advantages of investing in real estate, since physical assets acquire value instead of losing it, a characteristic that does not apply to other types of assets, due to the fact that physical assets lose value with the passage of time. The use, lack of maintenance or the material with which they are built ends up affecting the value of a physical good.

For example, electronic devices devaluate over time due to factors such as planned obsolescence and technological advances that improve the capacity, speed or storage of new devices.

Cars are another example of loss of value over time: they begin to lose value from the moment they leave the dealership.

Fortunately, this does not happen with real estate. On the contrary, properties increase in value thanks to external conditions, and location is one of the easiest factors for first-time investors to identify. As explained above, although home maintenance plays a key role in the appraisal of a property, location remains the primary factor in the acquisition of real estate.

While it is true that all investments represent a risk, real estate is still the most popular option among investors.

It is quite common for first-time investors to wonder why invest in real estate, especially when there are multiple options that offer results that appear to be immediate. However, these results, as has been mentioned several times, are either misleading or not really immediate.

Investing in real estate is also a way to protect money from inflation: housing prices are in dollars, and property value increases with inflation, so you can ensure your money and make it grow over time.

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